Bentonville, Ark. — CE sales slumped for Walmart and sister chain Sam’s Club during the company’s fiscal fourth quarter, which included the critical holiday and Super Bowl selling periods.
At the company’s namesake discount stores, CE comp sales declined by high single digits for the three months, ended Jan. 31. Greg Foran, who took the helm of Walmart U.S. last July as president/CEO, acknowledged that the chain “remained challenged” in tech due to myriad macro-factors, including industry contraction and price deflation.
Also contributing to what he described as “persistent declines” in Walmart’s home entertainment business is the shift from physical to digital media, while fewer new titles for Xbox One and PlayStation 4, and tough comparisons due to the anniversary of their release, added to the challenging quarter.
In addition, the chain is still being impacted by wireless carriers’ switch to installment payment plans for new phones. Although Walmart began integrating the programs into its systems last fall, “we’re still ramping up this service as we reacquaint customers with our ability to serve them in this category,” Foran said.
He added that softness in CE has also taken a bite out of Walmart’s online business, particularly for ship-to-home orders.
The CE situation was similar at Sam’s Club, where president/CEO Rosalind Brewer cited continued underperformance in tech. Category comps slipped by the mid-single digits, which nonetheless represented an improvement over the preceding quarter. She said the gains reflected the warehouse club’s introduction of 4K UHD TVs, an expanded assortment of wearables, and “a strong value proposition” on the iPhone 6 and 6 Plus.
Brewer added that the chain’s CE merchants are looking to build sales momentum by “rebalancing the portfolio, which involves reallocating resources towards higher growth, higher excitement categories.
“We need to make larger, faster strides,” she said.
For the quarter, net sales at Walmart U.S. rose 4.1 percent, to $79.6 billion, and comps increased 1.5 percent. The period represented the first positive traffic comp since the third quarter of fiscal 2013, Foran noted, and total completed transactions neared the 1 billion mark.
To address stagnant comps, Foran has developed a new strategic plan for the division, which he is scheduled to present to the financial community on March 31 in New York, along with a review of his first 100 days on the job.
At Sam’s Club, net sales for the quarter edged up 1.3 percent, to $14.9 billion, and comp sales increased 2 percent.
For the corporation, consolidated net sales rose 1.4 percent for the quarter to $130.7 billion, including a $2.6 billion impact from unfavorable currency fluctuations, and earnings rose 12.1 percent to $5 billion.
For the full fiscal year, consolidated net sales rose 1.9 percent, to $482.2 billion, including a $5.3 billion hit from currency exchange rates, and earnings increased 2.1 percent to $16.4 billon.
Total e-commerce sales rose about 22 percent for the year, with a marked shift toward m-commerce. Specifically, 70 percent of U.S. online traffic originated from a mobile device during the holiday period, noted Doug McMillon, president/CEO of parent Wal-Mart Stores, and traffic from the mobile app in Brazil nearly tripled on Black Friday.
Chief financial officer Charles Holley said the company plans to invest upwards of $1.5 billion in its digital and e-commerce capabilities, specifically earmarking its global technology platform, next-gen fulfillment network, recruitment, and digital and physical integration, noted global e-commerce CEO Neil Ashe. The discounter also expects to more than double its online assortment this year to over 10 million SKUs.
Separately, the retailer announced a plan to increase the pay rates of hourly sales associates. Effective this April, full and part-time workers at Walmart will earn at least $1.75 above the federal minimum wage, or $9 per hour, while current associates will earn at least $10 an hour by Feb. 1, 2016.
Starting pay at Sam’s Club will be $9.50 per hour, beginning in the first half of the fiscal year, Brewer said.
McMillon said the company will also provide its associates with greater training and career advancement opportunities and a more predictable work schedule, while Walmart U.S. is also realigning its store operational structure and adding back department managers “to give associates a closer relationship with their supervisors to help improve communication, direction and recognition,” Foran said.