Wal-Mart encouraged by sales increase but only cautiously optimistic for the holiday season

Sarah Halzack
November 13, 2014
Washington Post

Wal-Mart said Wednesday that sales at its U.S. stores increased for the first time in seven quarters, but executives say they are only cautiously optimistic as the retailer gears up for the crucial holiday season.
The company said it likely got a lift in the third quarter from lower gas prices, which helped free up disposable income for consumers who might otherwise be cash-strapped. Wal-Mart also said seasonal events such as back-to-school and Halloween helped sales.
But while low gas prices are expected to remain a tailwind for Wal-Mart and other retailers through the holiday season, Wal-Mart said it expects to face other key challenges. Once again, promotional pricing will make for a fiercely competitive environment, and executives said a lack of must-have electronics items this year could create drag during a quarter when the entertainment category typically makes up a large share of its sales.
With those factors in mind, Wal-Mart is forecasting flat to 1 percent growth for the fourth quarter.
Wal-Mart U.S. chief executive Greg Foran said the big-box retailer still has “a lot of work to do” to improve its business, which is facing mounting pressure from e-commerce giants such as Amazon.com. While the uptick in sales at U.S. stores was a welcome reversal from the sagging sales seen in recent quarters, the increase was relatively small–just 0.5 percent. Foot traffic at Wal-Mart U.S. stores also declined 0.7 percent in the quarter.
Wal-Mart has announced a variety of measures that it hopes will help it outdo rivals this holiday season. The company is offering five days of Black Friday deals, and it has already begun trying to lure holiday shoppers with a price rollback on 20,000 items that went into effect on Nov. 1. On Wednesday, the big-box retailer confirmed that it would offer price-matching on items from Amazon.com and other online retailers this holiday season, a policy that has been informally practiced by some store managers.
Wal-Mart said earlier this year that its growth strategy growing forward will increasingly focus on its e-commerce business and its small-format Neighborhood Markets stores. Global e-commerce sales grew 21 percent in the quarter; the company does not disclose what share of its overall sales are comprised of online purchases.
Wal-Mart saw stronger sales growth at its fleet of Neighborhood Market stores, which range in size from 12,000 to 43,000 square feet. Sales at stores open more than a year increased a healthy 5.5 percent. The company said pharmacy and packaged food have been the greatest contributors to that growth, but other categories have been relatively weak.
“I’m not happy that were doing as a good a job as we need to across the fresh foods,” Foran said in a conference call with reporters.
Wal-Mart plans to open more than 170 Neighborhood Markets in the fourth quarter. With their smaller footprints, the Neighborhood Markets allow the world’s largest retailer to move deeper into urban neighborhoods and other new markets.