stephen springham

Report
Strategic Preview: Q1
February - April 2013
13 May 2013
1
A Service
STEPHEN SPRINGHAM
Senior Retail Analyst
Strategic Preview: Walmart Q1
Analyst Comment:
“A slowdown domestically in Q1 has already been telegraphed by Walmart itself. A challenging comp base
(+3.0% in Q1 2012) has been 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” comp sales growth in the US in Q1, but there are fears the business
could disappoint slightly on the downside if the performance of rival Target is anything of a barometer of
wider consumer malaise.
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
contrasts 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.
More generally, it is encouraging to see 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.
STEPHEN SPRINGHAM
Senior Retail Analyst
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Strategic Preview: Walmart Q1
1. Expectations for the Quarter
2. US: Q1 Strategic Changes
3. Global: Q1 Strategic Changes
4. Outlook
5. What’s new at Planet Retail
1. Expectations for the Quarter
In its Q4 results presentation, Walmart already flagged a slowdown in Q1
and predicted “around flat” comp sales in the US.
Walmart US: Like-for-Like Sales by Quarter, 2010-2013 (%)
3.5
3.0
Comparable Store Sales (%)
2.5
2.0
1.5
1.0
0.5
0.0
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
-0.5
-1.0
-1.5
-2.0
Note: Includes Sam’s Club, excludes fuel; f – forecast.
Source: Planet Retail.
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Actual Like-for-Like Sales
Projected Like-for-Like Sales
Q4 2012 Q1 2013(f)
1. Expectations for the Quarter
Challenging environment both domestically and internationally.
 A leaked trading e-mail overshadowed the Q4 results. Unsubstantiated rumours of President &
CEO’s Mike Duke’s possible departure from the helm risk doing the same for the Q1 results.
 Any speculation over leadership/succession should not deflect attention away from the wider
issues. Domestically, the consumer and trading environment remains very challenging and the
business will do well to even achieve its earlier prediction of flat comps in Q1.
 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.
 As ever, international is likely to provide a mixed picture, although generally sales growth will be
muted rather than explosive – but the company will undoubtedly stress that operating income
grew faster than sales in most markets.
 Encouragingly, we are starting to see improved leverage of ‘best practice’ across the Walmart
family. Examples of this include a wider roll-out of the George clothing brand, both across the
Walmart international estate and through e-commerce. More encouragingly still, there is
tangible evidence of a more concerted and joined-up approach to e-commerce generally.
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