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CE Drags Down Walmart Comps

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.