Walmart's sales still slumping in U.S.

8/16/2011

Walmart Stores Inc. said Tuesday its second-quarter profit rose 5.7 per cent, due to international sales growth and cost cutting. But the world's largest retailer still wasn't able to reverse a two-year sales slump at its Walmart stores in the U.S.

Walmart's international business has consistently been strong, but its U.S. business has suffered as the U.S. economic downturn hit low-income Americans–Walmart's core customers–particularly hard. Walmart is considered a bellwether for U.S. consumer spending because it accounts for nearly 10 per cent of all nonautomotive retail dollars spent.

``We remain concerned about the economic pressure on our customers and the uncertain impact on their shopping behaviour,'' said Bill Simon,Walmart's U.S. president and chief executive in a statement. ``With this volatility, it is important as ever to deliver on Walmart's one-stop shopping promise for broad assortment and everyday low prices.''

The retailer, based in Bentonville, Ark., reported net income of $3.8 billion, or $1.09 per share, in the three months ended July 31. That compares with $3.6 billion, or 97 cents per share, in the same period last year. Revenue, excluding Sam's Club membership fees, was up 5.5 per cent to $108.6 billion.

Analysts had expected $1.08 per share on revenue of $108.08 billion.

Results were buoyed by Walmart's international business, which produces 26 per cent of its revenue. The company's international division was up 16.2 per cent.

For its U.S. division, revenue at stores open at least a year were flat– a key measure of a retailer's health in the U.S.– as a 5 per cent increase at Sam's Club was partially offset by a 0.9 per cent decline at Walmart stores in the U.S. It marks the ninth consecutive quarter that revenue at its Walmart stores in the U.S. open at least a year declined compared with the same quarter a year before.

In the U.S., Wal-Mart customers have been pummeled by the economy. In June, company officials said after their annual shareholder meeting that they are seeing wider swings than ever before as shoppers pull back ahead of each payday and increase their spending afterward.

At the same time, Wal-Mart is facing more competition from dollar stores, online retailers and rival Target Corp., which is aggressively pushing into the grocery business.

To fight dollar stores, the company is opening 15 to 20 smaller Walmart Express stores this year. Less than one-tenth the size of supercenters, they carry essentials from groceries to general merchandise like hammers and pre-paid phones and they're meant to fit into both cities, where space is expensive, and rural areas that can't support a super store.

In its larger flagship stores, Walmart is continuing to make up for an effort begun more than two years ago to de-clutter its stores. The move turned off shoppers who could no longer find their favourite brands or necessary items. Many went elsewhere. The company has said most of its grocery offerings are back but restocking general merchandise like clothing and home furnishings will take the rest of the year.

Walmart also has gone back to its ``Everyday Low Price'' strategy, the bedrock philosophy of founder Sam Walton, instead of slashing prices temporarily on selected goods. But recent surveys show that Walmart has lost its edge on price among shoppers.

The company raised its full year outlook to a range of $4.41 per share and $4.51 per share. Analysts had expected $4.46.

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