Wal-Mart Turns In Solid Quarter, Predicts Happy Holidays

by Sarah Mahoney, Nov 13, 2008, 1:32 PM

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While it's no secret that consumers are looking for stores that can save them money, Wal-Mart Stores' latest results offer plenty of additional evidence. The Bentonville, Ark.-based retailer says sales for the third quarter jumped 7.5% to $97.6 billion, while income from continuing operations gained 6.6% to $3.03 billion. And its comparable-store sales gained 2.7% in the quarter, excluding gasoline sales, while its Sam's Club division gained 4.5%.

"We are very pleased with our results this quarter," Lee Scott, Wal-Mart Stores, Inc. president and CEO, said in a conference call. "Despite economic difficulties around the world, we achieved solid sales and earnings growth, and we are optimistic about the upcoming holidays. At a time when our customer is feeling the pressure of a tough economy, Wal-Mart's price leadership is more important than ever."

"Price leads all of our marketing programs," added Eduardo Castro-Wright, president and CEO of Wal-Mart's U.S. stores. "We have a number of commercials that show customers how they can save on everyday needs. We will continue to remind customers that the savings add up when you shop at Wal-Mart. This message will continue to be very important during the holidays."

He added that he expects the winter holidays to follow its Halloween performance. "Our business came late, but it did come," he says. "The product presentation and marketing came together to drive double-digit sales growth in Halloween-related merchandise.

Executives also said apparel sales were strong, as were sales in entertainment. "We monetized traffic by leveraging an exclusive entertainment property, AC/DC, to drive sales in other areas. Our stores merchandise the band's newest CD in our young men's apparel area along with video gaming systems. The result was great sales for both the music and apparel areas."

Sales have also been strong, he adds, in gaming, flat-panel TVs, and GPS units, "and the sales results of our early holiday season special values last weekend exceeded our expectations. You will see a number of entertainment products featured in our Black Friday events."

Based on currency fluctuations, the company did lower its earnings forecast because of fluctuating currency exchange rates. But for the looming holiday season, it expects same-store sales to gain between 1% and 3%.

Although saving money may be top of consumers' minds right now, Wal-Mart is moving ahead with its market testing of more upscale store concepts. It introduced two new Sam's Club test concepts in the quarter--a business center in Houston, which eliminates such categories as pharmacy, jewelry and apparel, and includes a print and copy center, and a smaller-store format Garden City, Kan. Initial results are encouraging, execs say.

Another new concept is its Marketside convenience and fresh-foods stores, and Ad Age reports that the company is talking to as many as seven different ad agencies to take on the more upscale concept. Observers say Wal-Mart hatched the Marketside concept in response to Tesco's initial success with Fresh & Easy Neighborhood Markets. Separately, Tesco reported it is dialing down expansion plans.

Wal-Mart is also stepping up its new-media efforts. The Morning News, an Arkansas newspaper, reports that Wal-Mart is now reaching out to female heads-of-households via Facebook, YouTube and Twitter. The company is also said to be stepping up its use of mobile ads, texting women who want to know about pending price cuts.

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