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Walmart Reports Weak CE Comps In Q2

Bentonville, Ark. — Walmart and sister chain Sam’s Club reported weak CE comp sales for the second quarter, ended July 31, but cited renewed strength in TV and related attachments.

Walmart’s woes were partly structural, as a CE department remodeling initiative interrupted business during the reporting period, and both divisions suffered lower cellular sales due to system upgrade delays that prevented them from participating in carriers’ new early-upgrade programs.

Comp sales fell by the double digits within Walmart’s entertainment segment, which includes CE and entertainment software, although TV comps were up low single-digits and the retailer’s Vudu video-streaming service was up double digits.

“Our general merchandise business remains impacted by persistent industry softness,” said Greg Foran, who succeeded Bill Simon as president/CEO of Walmart U.S. earlier this week.

He said initiatives like the CE department reset and a new video game trade-in program will help mitigate the macro-headwinds, and that the remodeling effort will benefit sales in the back-half of the year.

He added that the company is “working diligently” to complete the upgrade of its mobile subscription system.

At Sam’s Club, comps within the technology and entertainment areas fell by the high single digits, although president/CEO Roz Brewer reported improvement as her merchants surround core categories like TV with “new and exciting” attachment products.

“The results are beginning to show,” she said. “For example, we’ve added new SKUs within the portable audio category, which had a positive effect on the quarter.”

Total company sales rose 2.8 percent to $119.3 billion for the period, including a nearly $700 million hit from unfavorable currency fluctuations, and net income edged up 0.6 percent to $4.1 billion.

In the U.S., Walmart’s net sales rose 2.7 percent to $70.6 billion; average ticket was up 1.1 percent; comp traffic was down 1.1 percent; and operating income fell 2.4 percent, which Foran attributed chiefly to a sharp rise in health-care costs.

Online sales were up by the double digits, adding 0.3 percent to the division’s comps, which were flat.

The greatest comp gains came from Walmart’s Neighborhood Market stores. The supermarket-like format delivered a 5.6 percent sales comp and a 4.1 percent increase in comp store traffic, Foran said.

At Sam’s Club, net sales rose 2.3 percent to $14.9 billion; average ticket was down 0.3 percent; comp traffic was up 0.3 percent; and operating income fell 4.6 percent due largely to a new cash-back rewards program for members.

Like Walmart, online sales rose by the double digits and added 0.3 percent to the warehouse club’s comps, which were also flat.

Both divisions are projecting relatively flat to slightly positive comps for the third quarter.

Commenting on his new role at Walmart, Foran said his initial focus will be on retail basics like in-stocks, improved service and productivity, providing the right items at the right price, and store cleanliness.

Longer term, he said, the emphasis will be on e-commerce and new store formats to return the business to a growth track. “The marketplace is changing and we will change with it,” he said in a prerecorded earnings discussion. “We have substantial capabilities and assets that position us for future opportunities.”