Wal-Mart sales per customer fall because prices keep falling, too
Filed under: Company News, Economy, Earnings, Wal-Mart Stores
Those everyday low prices took a bite out of its sales, but Wal-Mart Stores (WMT) still managed to post a winning third quarter. Profits were up thanks to cost-cutting, even as falling prices for food and electronics shrank sales receipts. Wal-Mart managed to beat Wall Street's expectations with income of $3.25 billion, or 84 cents per share, better than analysts' forecasts of 81 cents. Income for the quarter ended Oct. 31 was up 3.5% above the same time last year, and sales were up 1.1%, but comparable-store sales were down 0.8%.
Management had expected better sales growth and blamed the lower numbers on deflation in the food and electronics aisles. Analysts had been warning that Wal-Mart's low-price strategy would take its toll on earnings.
Comparable tickets -- sales per customer -- at Wal-Mart's U.S. stores were down due to lower prices, particularly in fresh grocery categories such as meat and dairy and in electronics, including flat-panel TVs, said Vice Chairman Eduardo Castro-Wright. He noted that Wal-Mart sold 25% more flat-panel TVs during the quarter than last year, but prices were 20% below what they were a year ago. And grocery prices have deflated by some 6% year-over-year, which took sales down by three percentage points, he said.
"Our continued increase in [comparable] customer traffic indicates the strength of our underlying business. However, comp ticket was down for the period, driven by price deflation that was well beyond what we had expected," he said. But CEO Michael Duke noted Wal-Mart U.S. still managed to rack up a 7% increase in operating income -- despite a mere 1.2% increase in sales -- thanks to cost and inventory controls.
A More Optimistic Forecast
Wal-Mart's Sam's Club warehouse clubs also got hit by deflation in gas prices, which turned what would have been a 6.3% increase in same-store sales down to a 4.1% gain. Sam's Club also faced the same price deflation in food and electronics, both of which are strong categories for the chain, said president Brian Cornell.
Even while it forecast that fourth-quarter sales will be somewhere between 1% below last year's to 1% ahead, Wal-Mart still increased its profit forecast for the fourth quarter and the year. Chief Financial Officer Thomas Schoewe said the company now expects fourth-quarter earnings per share between $1.08 and $1.12, and full-year earnings between $3.57 and $3.61. That compares to the forecast of $3.50 to $3.60 it had expected at the end of the second quarter.
"We believe no other retailer is as well positioned to succeed this holiday season as Wal-Mart," he said.
Wal-Mart's units all reported sales per labor hour were down and wage growth was less than sales growth, which means labor costs are down. While advertising spending is up, other expenses were lower, as well. "The productivity loop is back at Wal-Mart," said Duke.
Still Adding Millions of Square Feet
Management vowed to continue pushing low prices. The strategy has worked to help Wal-Mart gain market share and will continue to work when the economy recovers, the executives maintained. Duke noted that Wal-Mart has added more than 13 million square feet of retail space this quarter, and more than half of that in the U.S., despite the economic slump.
"When the recession is behind us," said Duke, "we believe people will continue to shop with a new instinct for value, and they will find it at Wal-Mart." How's that for a brave prediction?
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Reader Comments (Page 1 of 1)
11-12-2009 @ 12:07PM
Mike Zachaczewski said...
I'm sure that the peopleofwalmart site really helped their sales this quarter.
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11-12-2009 @ 1:05PM
Mike said...
Punch in Walmart Diversity and take a look at that. It's fashioned all around minorities which includes and promotes gay,lesbian, women, latinos,muslims,transvestites, phillipinos,african-americans,and pacific islanders, and mature. I think mature is supposed to mean whit people over 65.
Basicly everyone except the young to middle aged white males.
11-12-2009 @ 1:06PM
Polly said...
Poor location, poor quality and poor service. I am sure those contributed to their loss. I never shop there.
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11-12-2009 @ 1:21PM
Fred said...
LOL, some people will believe anything.
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11-12-2009 @ 2:05PM
dajt57 said...
cheap stuff that breaks easy is not my idea of a bargain. i never shop at walmart. i only use local shops every chance i get.
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11-12-2009 @ 2:33PM
gary tennant said...
Yeah ,I guess increase inprofits after cutting employees and fulltime coverage. Yeah and thats not counting the management restructure so there is hardly any real leadership in the store during peak hours... i would like someone to due a study and see how many people(blue colar associates that actually make it to retirement) before they fire them.... what about the optical lab in columbus , Ohio . that was a wal-mart lab , newest tech. , over 1000 employed... closed down all hush hush , so no one finds out that they shpped all that work to MEXICO!!!!!
YEAH NO SURPRISE HOW THE MAKE PROFIT WITH SLIDING SALES....
THANKS WAL-MART 15 YEARS WITH THE COMPANY AND I MAKE ONE MISTAKE .... THEN FIRED.... ITS AMAZING DISTRICT MANAGER OF THE REGION LAST YEAR , CHANGE POSITION , CRAPY TRAINING AND SUPPORT. FIRED WITH NO CHANCE TO CORRECT PROBLEM... YOU REALLY CARE....
ITS TIME ASSOCIATES STAND UP .... ITS TIME FOR UNIONS AT WAL-MART!!!!! LOL YES THATS WHAT THERE SCARRED OF... THATS WHY THERE REALLY CHANGING MANAGEMENT, JOB DESCRIPTIONS,
THERE JUST TRYING TO MAKE IT HARD TO UNIONIZE....
DIVERSITY YEAH RIGHT.... THEY DO WHAT THEY HAVE TO .... MANAGEMENT PUT NON QUALIFIED MINORITIES AND WOMEN IN POSITIONS JUST TO GET OFF A REPORT.... THEY HAVE CONFERENCE CALLS AND THREATENS UPPER MANAGEMENT TO PUT PEOPLE IN POSITIONS THAT ARE NOT READY , THEY BY PASS PEOPLE JUST TO GET OFF A REPORT....
DON'T GET ME WRONG JOBS SHOULD BE AVAILABLE TO EVERYONE WHO IS QUALIFIED RACE, SEX AND RELIGION SHOULD NOT MATTER BUT IT STILL DOES AT WAL-MART....
WATCH YOUR BACK!!!! THERE WATCHING.....
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11-12-2009 @ 5:12PM
my fair share said...
you are on the nose with this one cut emp. hr if you make more $ you get less hr. how many emp. get 40 hr none. i know store manigers that do nothing sit on there a@@ and let the little man do there job and get a fat $30,000 bounes each quarter forb doing nothing . go union to be treated fair.
11-12-2009 @ 4:38PM
John said...
Half these people can't even spell!!! Not even Walmart would hire them. Go back to school people!
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11-12-2009 @ 4:54PM
Hannah said...
Oh good grief! Why doesn't this article mention HOW WalMart has "restructured?" By getting rid of long-term employees and managers! They now have "zone managers" who walk around the store with clipboards doing basically NOTHING. These are low paid employees who can't help any one with anything. They are trying so hard to be like Target (adopting Target's business model) but they are not willing to train or pay their employees to be at the level of those at Target. Their employees get poorer or lose their jobs, and there are three or four Walton's in the top 10 money makers in this country. What's wrong with THAT picture?? GREED of the owners will be the ulitmate failure of WalMart, and then the small businesses they ruined may be able to make it once again. Sam Walton must be very dizzy from rolling over in his grave at what his family has done to his "Made in America" company.
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11-12-2009 @ 5:13PM
Realist said...
Don't forget - if you buy Chinese products at Walmart all you are doing is helping to fuel China's economy and expansion which in turn uses more energy. Get the picture? The more vibrant their economy, the more oil they will demand and the higher the price for the rest of the world. You already know the solution!
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11-17-2009 @ 5:41PM
Hannah said...
I've been telling people that for YEARS. But most people just don't make the connection! As long as the USA keeps consuming these horribly made, lead filled, and sometimes toxic products, China is going to be THE world power. I wonder if any one has actually figured out how many American jobs Wal Mart has LOST because of using China as their main supplier?
11-13-2009 @ 12:55AM
well hung said...
all you walmart employes are suckers you get only 10% of and 0% on sale and food items khols gets 20% on everything lowes get everything at COST along with best buy . and your manigers get fat bounes for your work i say go union and stop the greed .
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