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Wal-Mart To Revamp CE Sections; Q1 Profits Fall

Bentonville, Ark. — Wal-Mart said extreme winter weather and higher taxes took the wind out of its first-quarter results.

The discounter is also revamping the CE departments of its flagship Walmart U.S. stores to give growth categories greater prominence and floor space.

Net income fell 5 percent to $3.6 billion for the three months, ended April 30, and net sales, which were curbed by unfavorable currency fluctuations, edged up 0.8 percent to $114.2 billion worldwide. Global e-commerce sales rose about 27 percent.

At Walmart U.S., net sales rose 2 percent to $67.9 billion, comp sales were flat, and operating income fell 4.3 percent to $5 billion. At Sam’s Club, net sales excluding fuel were flat at $12.2 billion, comps remained static, and operating income slipped 1.4 percent to $477 million, also excluding gasoline.

During the quarter, comp traffic decreased 1.4 percent at Walmart U.S. stores while average ticket rose 1.3 percent. E-commerce sales contributed about 0.3 percent to Walmart comp sales, the company said.

At Sam’s Club, comp traffic was down 0.2 percent and average ticket declined 0.3 percent. E-commerce sales contributed about 0.2 percent to Sam’s Club’s comp sales.

“Like other retailers in the United States, the unseasonably cold and disruptive weather negatively impacted U.S. sales and drove operating expenses higher than expected,” said Doug McMillon, president/CEO of Wal-Mart Stores.

He stressed that the company’s underlying business is “solid,” and said it would continue investing in lower prices, improved services and stronger e-commerce capabilities.

In a pre-recorded earnings call, Walmart U.S. president/CEO Bill Simon said CE remains challenged by price deflation. Steps to revitalize that business include a new video game trade-in program, whose early results are “encouraging,” and a retrofit of the departments this quarter that will improve product adjacencies and give greater space and prominence to growth categories.

Simon said Walmart’s e-commerce business grew by the double-digits during the quarter, but was tempered by softer results in CE. He added that the division will add upward of 100 Walmart Express small-format stores this year.

At Sam’s Club, president/CEO Rosalind Brewer said inventory tightness in TVs and tablets contributed to a high single-digit decline in CE comps for the quarter. The wholesale club’s wireless business was also pressured as carriers changed their contract terms amid “shifting industry dynamics,” although Walmart’s recent acquisition of Simplexity’s wireless activation platform will make customer transactions more efficient, and will show material benefits in the coming quarters.

Online sales growth was strong, Brewer said, and income from annual membership fees rose 10.5 percent.