Walmart has underperformed in first quarter of 2013, according to Stephen Springham, senior retail analyst at Planet Retail, a London, England-headquartered market research firm.
"Expectations had already been tempered ahead of the today’s results presentation – a slowdown in the US had already been telegraphed by Walmart itself at the full-year presentation, he commented." A challenging comp base (+3.0% in Q1 2012) was exacerbated by weak consumer demand, as core US customers were hit by the double whammy of the expiry of payroll tax breaks and delays in receiving income tax rebates. Walmart previously gave guidance of ‘around flat’ comparable sales growth in the US in Q1, but Target’s downgrade during this Q1 prompted fears of far deeper consumer malaise. These were more than realized with a very disappointing comparable sales performance (excluding fuel) at Walmart US of -1.4%.
“Two pressing issues demanded immediate responses in Q1 in the US: arresting the decline in traffic and addressing the perceived problems in out-of-stocks/empty shelf syndrome. A number of initiatives have been launched in response to both, including the reintroduction of the Great Gas Rollback scheme. However, the positive impact of these initiatives appears to have been muted, with traffic down by -1.8% in Q1.
“International performance was also weak in Q1 with sales growing by just 2.9% (+5.4% on a constant currency basis)," saidSpringham. "Over Q1, Walmart outlined its 2013 investment plans for a number of its key international markets, including the UK, China, Mexico and Central America. The common denominator in each was an increase in investment, but in true Walmart style with an underlying mantra of 'doing more for less.' However, there are interesting variations between the respective investment strategies.
In China, there will be a necessary acceleration in the rate of store remodels in tandem with a fresh wave of new openings. By contrast, Asda in the UK will see a marked deceleration in new store development, but increased investment in e-commerce initiatives.
“On a slightly more encouraging note," he added, "we are seeing Walmart increasingly apply leverage (one of its key watchwords) not just operationally, financially and on expenses, but also in terms of ‘best practice’ across its various markets. More encouragingly still, there is tangible evidence of a more concerted and joined-up approach to e-commerce generally.”
