Skip to main content

Is Walmart's small grocery chain heading to Canada?

Analyst speculates Neighborhood Market may arrive here within three years

The newest grocery chain coming to Canada? How about Walmart's Neighborhood Market.

The Walmart discount chain is performing well in the United States and yesterday one analyst speculated that Walmart could decide to introduce the format to Canada.

Keith Howlett, an analyst with Desjardins Securities in Toronto, noted that Walmart has spent the last decade opening its massive supercentres across the country and could now be looking at a smaller format to keep on driving growth.

"We speculate Walmart Canada may test this concept within the next three years," he wrote in a note to investors yesterday.

Neighborhood Markets are grocery stores that average around 40,000 sq. ft. in size. The first such store opened in the late 1990s and there are now more than 600 Neighborhood Markets in the U.S.

Howlett's note came the same day that Walmart reported quarterly results.

For the quarter ended April 29, Walmart’s revenue climbed to US$115.9 billion from $114.83 billion in the quarter, breezing past projections for $112.67 billion in revenue from industry analysts, according to a survey by Zacks Investment Research forecast.

Walmart International had a strong start to the year with 10 of 11 markets posting positive comparable store sales and nine of those markets growing comp sales by more than 4%.

In particular, Walmart Mexico and Canada performed well, with strong sales, market share gains and profits.

In Canada, comp sales grew 6.7% during the quarter, driven by traffic growth of 4.6%.

“Comp sales have now been positive for eight consecutive quarters,” said Doug McMillon, Walmart’s president and CEO. “The performance was driven by improvements in our merchandise assortment and price investment which led to strong customer traffic growth.”

McMillon also noted that Walmart Canada’s ecommerce business has risen with the expansion in February of Walmart's online grocery pickup service to the Toronto area. Up until then the service was only available in Ottawa.

Internationally, ecommerce sales grew 7%, which McMillon called “too slow.” (McMillon did not specifiy how much Walmart's commerce sales rose in Canada. He also didn't specify the company's sales in this country or its profits for the quarter.)

Sales at U.S. stores open at least a year rose 1%, the seventh consecutive quarterly increase. The sales metric is important because it strips away the volatility of recently opened or closed stores, providing a better look at how a retailer is doing.

Walmart is making lots of changes that it says keep it competitive in a changing retail landscape. It's spending $2.7 billion on higher wages in the U.S. and other investments for its hourly workers over a two-year period.

It has also stepped up investments in online operations and in stores. It's paying particular attention to what it's stocking on store shelves and expanding online grocery shopping to more than 150 locations across more than 40 markets in the U.S.

Walmart continues to sharpen its attack on Amazon. Last week, it announced that it was quickening its free-shipping pilot program to two-day delivery from three, and it's cutting a dollar off the membership price. Membership is now $49 per year.

The pilot program was launched last year as a possible answer to Amazon Prime's two-day shipping, a big reason for its explosive growth.

Amazon membership costs $99 a year, which comes with a wide array of perks, including household product subscriptions, one- and two-hour Prime Now delivery, free streaming music and video, photo storage and more.

Healthy sales at Walmart came one day after Target Corp. reported slowing quarterly sales. Before Target, Macy's Inc., J.C. Penney Co., Nordstrom Inc. and Kohl's Corp. posted weak first-quarter sales as pressure from off-priced stores like T.J. Maxx and online retailer rose.

This ad will auto-close in 10 seconds