Walmart’s Q2 2014 Results – Comments

I found various notable items in Walmart’s Q2 2014 earnings call transcript (pdf) dated August 15, 2013.  I view Walmart’s results and comments as particularly noteworthy given their retail prominence and focus on low prices.  I have previously commented on their quarterly conference call comments; these previous posts are found under the “paycheck to paycheck” label.

Here are various excerpts that I find most notable:

comments from Mike Duke, president and CEO of Wal-Mart Stores, Inc, page 3:

Walmart U.S. comp sales declined 0.3 percent in the 13-week period ended July 26. Traffic improved from the first quarter, and we gained market share in key categories. We continue to invest in price and we are focused on delivering positive comps during the next two quarters.

comments from Bill Simon, president and CEO of Walmart U.S., page 9:

Net sales grew 2.1 percent to $68.7 billion, with about $1.4 billion added in sales year over year. For the quarter, we delivered a negative 0.3 percent sales comp. Traffic decreased 0.5 percent and ticket increased 0.2 percent. The lack of meaningful inflation and the 2 percent increase in payroll taxes impacted our results; however our performance reflects more than a 100 basis point improvement over Q1.

comments from Bill Simon, president and CEO of Walmart U.S., page 10:

Now, let’s cover additional financial details. During the quarter, we continued working with our suppliers to drive cost of goods savings. These initiatives, along with more favorable merchandise mix and logistics productivity, benefited gross profit rate. Overall, our gross profit rate was up 23 basis points, leading to an increase of 2.9 percent in gross profit dollars. We continue to monitor the pricing environment in each market to ensure price leadership, which is the cornerstone of our business strategy.

comments from Bill Simon, president and CEO of Walmart U.S., page 12:

For the quarter, grocery sales, which includes food and consumables, grew by nearly $1 billion. We delivered delivered a slightly negative comp for the retail period. Our results were influenced by lower than anticipated inflation, even deflation in some areas, including dry grocery, frozen and snacks and beverages. Softer performance among these larger categories impacted our overall comp by more than 50 basis points. Adult beverages continued a solid trend of results, delivering a high single-digit comp.

comments from Bill Simon, president and CEO of Walmart U.S., page 15:

I’m particularly pleased with the performance of Neighborhood Markets. We continue to roll out this format aggressively throughout the country, opening more sites in the second quarter than in any other quarter in our history. In fact, we opened 12 stores in just one day this quarter.

comments from Bill Simon, president and CEO of Walmart U.S., page 16:

Given the current economic environment, we expect our comps to be relatively flat in the coming quarter. We remain confident about the back half of the year, as we continue to execute on initiatives to drive our business, and in particular, our top line. The customer remains challenged, but I’m confident in our position and in the ability of our teams to execute. Our strategy is sound, our pricing position is solid and our ability to leverage is strong, all of which bodes well as our comps continue to improve.

comments from Charles Holley, CFO, page 36:

Economic conditions in many of our markets around the world remain difficult. The U.S. retail environment remains challenging, with virtually no inflation in food and the higher payroll tax instituted earlier in the year. High fuel prices can impact spending as well. Our expectations for the back half of the year are through a lens of cautious consumer spending.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1661.64 as this post is written