Walmart Cites More CE ‘Price Deflation’ in Q4

Walmart experienced “continued price deflation” in electronics in Q4 ended Jan. 31, Bill Simon, CEO of its Walmart U.S. division, said in a pre-recorded earnings call on Tuesday. But he said, “Despite the price pressure on TVs, we still had positive unit growth, and we grew market share,” although he didn’t say by how much. Electronics make up the largest percentage of Walmart U.S.’s overall general merchandise sales, he said.

There were “some bright spots in electronics,” Simon said. For example, he said, “We again had very strong sales of our prepaid wireless product.” But he said Walmart “can only account for a commission on sales of prepaid wireless products and services, as well as third-party gift cards.” Had the retailer “been able to account for the full sale, we would have added 60 basis points to” the Q4 same-store results, he said.

Weather and tax refund loan delays hurt Walmart’s Q4 results, Simon said. But he said “the primary factor for” its negative same-store sales performance versus Q4 the prior year was “general merchandise, and more specifically electronics,” he said.

Walmart U.S. performed weaker in Q4 than the company’s other two divisions, Walmart International and Sam’s Club. Walmart U.S. revenue dipped 0.5 percent from Q4 the prior year to $71.1 billion and Walmart U.S. same-store sales fell 1.8 percent, the company said. Total company sales grew 2.5 percent to $115.6 billion, with Sam’s Club revenue up 4.4 percent at $13.1 billion and Walmart International revenue up 8.9 percent at $31.4 billion. Combined Walmart U.S. and Sam’s Club same-store sales dipped 0.8 percent, with Sam’s Club same-stores alone growing 4.5 percent. Walmart was “disappointed with our sales performance” in the U.S. division, said Simon. The 1.8 percent same-store decline “didn’t meet anyone’s expectations -- they certainly didn’t meet mine,” he said. Walmart’s Q4 profit grew to $6.1 billion, or $1.70 per share, from $4.8 billion, $1.25 per share.

Simon predicted that average unit retail prices will “continue to decrease in electronics, particularly for TVs, hardware and gaming.” But he said the company believes it “can mitigate some of this price pressure by increasing our focus on products and categories like iPads and other tablets that offer greater growth opportunities.” He predicted that as Walmart moves through Q2 and Q3 this year, “we should begin to see the sales declines in these categories abate."

Walmart’s Q4 online sales growth “exceeded the industry,” which was believed to be up 11 percent from Q4 the prior year, Simon said. Development of its small format stores, meanwhile, was “progressing ahead of schedule,” and it expects to open its first Walmart Express stores in Q2, he said. The company was also “very pleased with the reception customers are giving potential Walmart stores in cities” including Chicago, New York, San Diego and Washington, he said. The company expects to report Q1 Walmart U.S. same-store sales that are down 2 percent to flat versus Q1 last year, it said.

At Sam’s Club, CEO Brian Cornell said, “Relative to the industry, we are very pleased with the sales of our electronics and technology categories” in Q4. It also “grew market share over the fiscal year” in that category, he said. Sam’s Club “members responded well to our strong brand offering including LG and the Apple iPhone and iPad,” he said. While it continued to “experience price pressure in electronics, especially in” TVs, he said, Sam’s Club “had positive unit sales growth of TVs."

The company completed 65 club remodels, expanded two clubs and relocated three others in the fiscal year, Cornell said. It expects “to complete remodels on 60 to 70 clubs this year,” he said. The “sales momentum” it saw last fiscal year “is carrying over into the first few weeks of the new fiscal year,” he said. The company expects that Sam’s Club same-store sales, not including fuel, for the current 13-week period ending April 29 will grow 1-3 percent from a year ago, he said.