Walmart Sees Turnaround at its U.S. Stores?

Walmart returns to its Every Day Low Prices campaign

Bentonville, AR—Hoping to stave off slumping sales that have plagued its U.S. division for more than two years, Walmart executives told investors Wednesday that comparable store sales increased three months in row, reinforcing the company’s vow to show a quarterly increase by years end.

While Walmart no longer reports monthly comparable store sales, Bill Simon, ceo at Walmart’s U.S. division, said comparable store sales had increased in July, August and September, a turnaround from its second quarter results.

Simon and other Walmart executives told investors and analysts in an annual meeting that sales appear to be more consistent as gasoline prices have come down. Moreover, company’s strategy to bring back thousands of items and basics, resume its lay away program, and increase its advertising spend to promote its return to “everyday low prices,” also has helped.

“The progress is now visible in our business,” said Simon. “We have confidence in our plan.”

A Road to Recovery?

Still Walmart, which reports its third quarter results on Nov. 15, let stand its third quarter U.S. comparable store forecast for a 1% drop to a 1% increase. But the company said it now expects sales to increase 5% to 7% in fiscal 2013 (which begins in February 2012), higher than the 4.7% growth that analysts’ average estimates expect.

Retail analysts are paying close attention to Walmart’s U.S. division to indications about current and future trends in consumer spending. Walmart’s U.S. division, which account for about 62% of the entire company’s sales, also comprises about 11% of all U.S. retail sales.

“We have had very positive momentum in the back half, especially in the U.S,” said Charles Holley, Walmart’s executive vice president and chief financial officer. “We have more opportunities to grow more sales in the U.S. and around the world. But we will be deliberate.”

Like every one else, Walmart management is still concerned about high unemployment and its impact on consumers’ confidence.

“We still feel the customer is fragile. The customer will spend discretionary income, but they will not just go out and spend it without really thinking it through,” Holley told the press after the meeting.

“Walmart’s going to be aggressive in price and that just bodes well for the consumer,” said ITG Investment Research analyst John Tomlinson, who attended the meeting. “This is going to be a very competitive retail landscape this holiday season. They’re committed to winning.”

To Add 385 U.S. Stores

Walmart also said it will increase capital expenditures to $13 billion to $14 billion in both fiscal 2012 and fiscal 2013, up from $12.7 billion in fiscal 2011, Holley said.

While capital spending will decrease 7.4% in its U.S. stores, the company will raise international spending by 11.8%.

Still, Walmart plans to open 130 to 135 supercenters and 80 to 100 small-to-medium stores next year in the United States, said Karen Roberts, president of Walmart Realty.

Walmart’s primary growth vehicle continues to be its supercenters in the United States, though new supercenters are smaller about roughly 90,000 to 120,000 square feet instead of the previous 185,000 square foot average.

Internationally, Walmart will focus on existing markets in 28 countries, which garnered about $109 billion in sales last year, according to Doug McMillon, ceo at Walmart’s international division.

Walmart launches "My Local Walmart" page on Facebook

“First and foremost we want to build scale in the markets where we are,” McMillon told analysts. “We like the markets that we are in and will continue to prioritize those. There are a few remaining high-growth markets we are not in, and we won’t miss an opportunity there if one presents itself.”

Local Initiative with Facebook

In other news this week, Walmart announced a partnership with Facebook that would allow its 9 million Facebook fans to specifically tailor their pages for one of the retailer’s 3,500 locations.

Walmart’s pages allow its shoppers to interact with its local stores as well as get information on new products, events and discount offers. Analysts said such a partnership between a major retailer and Facebook underscores how important establishing a deeper relationship with shoppers is, enabling Walmart to react faster to consumer demands.

 

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