Persistent high unemployment and wary consumers added up to sluggish second-quarter sales at three major mass market retailers, although their expectations for the rest of the year vary widely.


Greg Jacobson, second-quarter sales, Walmart, Walmart U.S. division, Bill Simon, president, chief executive officer, vice chairman, Eduardo Castro-Wright, Target Corp., Gregg Steinhafel, chairman, president, chief executive officer, BJís Wholesale Club Inc.










































































































































































INSIDE THIS ISSUE
News
Opinion
Other Services
Reprints / E-Prints
Submit News
White Papers

Retail News Breaks Archives

Sales sluggish at Walmart, Target, BJís

August 18th, 2010

NEW YORK – Persistent high unemployment and wary consumers added up to sluggish second-quarter sales at three major mass market retailers, although their expectations for the rest of the year vary widely.

Walmart reported a 3.6% increase in second-quarter profits to $3.60 billion, or 97 cents per share, which exceeded by a penny the consensus estimate of analysts surveyed by Thomson Reuters. Total sales rose 2.8% to $103 billion, but both Walmart’s bottom and top lines were driven by the retailer’s international division, as its flagship Walmart U.S. division continued to lag. In addition, foreign exchange rates contributed a benefit of $857 million to Walmart’s consolidated sales.

In the Walmart U.S. division, sales were flat at $64.65 billion, but comparable-store sales declined 1.8%. Operating income for the segment dipped 0.2% to $4.88 billion, as gross margins were pressured by intense price rollbacks executed in May and June, according to Bill Simon, president and chief executive officer of the Walmart U.S. operation.

During a prerecorded conference call, Simon, who recently took over direction of the flagship unit from vice chairman Eduardo Castro-Wright, said that the price rollbacks failed to generate the hoped-for sales growth, adding that the company has returned to its traditional emphasis on everyday low prices. He also pointed out that the retailer is working closely with suppliers to reevaluate its assortments as it continues to retreat from a zealous SKU rationalization program that eliminated a number of popular brands and alienated some shoppers.

"In the coming weeks and months, our assortment will be more relevant to our customers, with the right mix of new and innovative products," he said. "We’re leveraging our suppliers’ capabilities to help us drive impactful features. And, we are restoring thousands of products to our assortment and adding new items. We plan to win in every category and let our customers decide through their purchase decisions what to include in our assortment."

Walmart management was upbeat about its prospects for the rest of the year and raised its profit guidance for the full fiscal year. Walmart now expects earnings per share from continuing operations to range from $3.95 to $4.05 per share, up from management’s previous range of $3.90 to $4.00 per share.

At Target Corp., meanwhile, net income rose 14.3% to $679 million, or 92 cents per share, just meeting analysts’ average forecast. The impressive results owed more to strong cost controls in Target’s retail business and improved profitability in its credit card segment, however, as retail sales were weaker than expected.

Target’s net sales grew 3.8%to $15.13 billion, fueled primarily by new store construction since comparable-store sales increased just 1.7%, short of management’s expected range of 2% to 4% growth and analysts’ consensus goal of 2.3%.

"Our retail segment generated strong profitability, overcoming softer-than-expected sales," said Gregg Steinhafel, chairman, president and chief executive officer, in a statement. "Growth in guest traffic and apparel sales remained robust, and teams across the company continued to exercise thoughtful control of expenses. Our credit card segment also enjoyed very strong results, as disciplined underwriting, superb execution and improving risk trends caused a sharp reduction in bad debt expense compared with last year. Regardless of the pace of recovery, we are well-positioned to continue to gain profitable market share."

The outlook was a good deal less positive at BJ’s Wholesale Club Inc., which revised its full-year sales and earnings guidance downward after missing Wall Street’s prediction. Net profit rose 2% to $35.8 million, or 67 cents per diluted share, well short of the 73 cents-per-share consensus of analysts. Although net sales increased 8.6% to $2.72 billion, comparable-club sales excluding gasoline improved 2.9%.

Consequently, BJ’s reduced its full-year comparable-club merchandise sales estimate to an increase of 2.5% to 4.5%, down from management’s previous goal of 2.7% to 4.7% growth. Its earnings forecast for the year was also cut to a range of $2.40 to $2.50 per share from previous guidance of $2.58 to $2.68 per share. Analysts expected $2.67 per share.

Advertisement