Wal Marts top line sales divert attention away from underlying problems

Implications: Wal – Mart (WMT) barely squeaked out January with a 0.5% comp. store increase. This result is rather dismal given their aggressive promotional activity in January. WMT stores showed a weaker gain than Sam’s club and the International Divisions, although they don’t reveal comp. store sales was up over 20% connoting that the domestic business is in distress.

Analysis:  Wal Mart is indeed by far the largest retailer in the world and is a very well run company. Problems arise and worries occur because the “bar is set so high” that any blip in their performance sends shock waves throughout not only the retail sector but the global economy. There is still room for Wal Mart to increase their market share domestically, increase their acquisition of real estate and most importantly grow in emerging and new markets. That being said they need to be careful of cannibalization within their markets, poor new store productivity, over expansion and selecting of prime real estate where they compete with many inside and outside their sector.


WMT has experienced a fall off in store visits and traffic in the past 3 years and if not for the AUR increasing comp. sales would be negative. It has yet to be determined why traffic is down given the price/value relationship of WMT’s assortment. This is an initiative management is putting a lot of focus on due to the counter intuitiveness of the dynamic.
 


Apparel and Home continue to be the laggards in their assortment. With the move of the apparel divisions into New York inspiration may be easier to come by for the merchants who have resided in Bentonville. Hard Goods, Groceries and other ancillary assortments are performing well so the importance of figuring out the Apparel and Home business is crucial.



Mexico is the laggard in their international division and management is working on the assortments as they feel the problem lies in the penetrations of hard Goods, Soft Goods and Groceries. In summation a + $375 billion business is a high class problem and I would bet that WMT will figure out their problems and be regarded as best in class.