CE Drags Down Walmart Comps

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Bentonville, Ark. - Walmart said CE price compression was the main culprit behind a nearly 2 percent decline in same-store sales during its fiscal fourth quarter, and is looking to tablets to help boost category revenue.

 Comp sales declined 1.8 percent at the company's U.S. flagship stores for the three months, ended Jan. 31, while net sales slipped 0.5 percent to $71.1 billion. Operating income increased 4.8 percent to $6 billion, the retailer reported today.

"The primary factor for our negative comp-sales performance was general merchandise, and more specifically electronics," Bill Simon, president/CEO of Walmart U.S., said in prerecorded comments. "Electronics, which comprises the largest portion of the overall general merchandise sales mix, had continued price deflation."

Despite price pressure, the discount chain increased its TV unit volume and gained market share during the period, Simon said, while sales of prepaid wireless products and services were "very strong." Indeed, the commission-based category would have added 60 basis points to the division's fourth-quarter comps had it been able to claim the full sale, he said.

Simon said average CE selling prices will continue to fall, particularly in TV, gaming and hardware, although sales declines in those categories are expected to begin abating through the second and third quarters.

He added that Walmart will increase its focus on iPads and other tablets, which offer greater growth opportunities and can help mitigate some of the pricing pressure on CE.

In addition, Walmart is implementing a four-point plan to boost business at existing stores, although Simon warned that it "will take time" before comp sales return to positive territory.

The plan calls for price leadership under Walmart's every-day-low-price (EDLP) strategy; adding back items that had been removed from its merchandise mix to provide "the broadest assortment possible"; improving the efficiency and reducing the disruption of its store remodels, and reallocating appropriate real estate to various departments and merchandise categories; and enhancing the chain's multichannel shopping options.

The division also plans to open its first small-format Walmart Express stores in the second quarter, and is eyeing such urban markets as Chicago, New York, San Diego and Washington, DC.

Meanwhile, Walmart's Sam's Club warehouse club division posted a 2.5 percent gain in nets sales to $11.9 billion and a 2.7 percent hike in comp sales, both excluding gasoline. Operating income rose 57.1 percent to $487 million for the three months, ended Jan. 31.

In prepared comments, Sam's Club president/CEO Brian Cornell said that despite continued TV price erosion, the division was "very pleased" with its CE and IT sales relative to the industry, and grew market share over the fiscal year. "Members responded well to our strong brand offering including LG, and the Apple iPhone and iPad," he said. "We continue to experience price pressure in electronics, especially in televisions, but had positive unit sales growth of TVs for the quarter."

Total company sales rose 2.5 percent to $115.6 billion for the quarter and 3.4 percent to $419 billion for the full fiscal year. Earnings rose 4.3 percent to $5 billion for the quarter and increased 6.3 percent to $15.4 billion for the full fiscal year.


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