Winnipeg Free Press - PRINT EDITION

Walmart sales soften as Target enters Canadian market

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Walmart took a hit during Target's first quarter in Canada, as one of the country's strongest retailers posted falling same-store sales and operating income in a period of dampened consumer spending and unusually cold weather.

"Net sales grew 6.1 per cent, but Canada had a decline in operating income and did not leverage expenses," Doug McMillon, president and chief executive of Walmart International, told investors on a first-quarter conference call Thursday for parent company Wal-Mart Stores Inc.

More critically, sales at stores open for more than a year, an important barometer of retail health known as same-store sales, fell 1.3 per cent in the period ended April 30 and customer traffic at those stores declined two per cent. Average basket size edged up 0.7 per cent on the same basis.

"Our results were impacted by the unseasonably colder weather this year versus unseasonably warm weather last year and the leap year overlap," McMillon added, saying consumer spending weakened in Canada due to higher household debt levels.

He said Walmart, which has 379 stores across the country, had solid sales of food, consumables and home lines, and made market-share gains of 120 basis points in measured categories of food, consumables and health and wellness as measured by Nielsen Co. Soft home entertainment sales persisted and sales of hard lines and apparel were hurt by frigid weather.

Canada's largest mass merchant had been girding for Target's arrival in the last year by significantly boosting its assortment of food and by adding multiple stores, upping its store count by 13.8 per cent as it took over 39 Zellers stores and boosting overall square footage in the Canadian market by a whopping 10.6 per cent. Walmart Canada now has 209 grocery-inclusive supercentres and 170 of its standard discount stores, compared with 333 stores a year ago. By year's end, the retail giant will have another nine new stores and through conversions will have 37 more supercentres, for a total of 246 supercentres and 142 discount stores.

Wal-Mart said operating expenses grew faster than sales, which the company attributed to declining same-store sales, costs associated with its massive growth in store base and investments in e-commerce.

Beyond noting its gross profit rate increased, it did not break out Canadian sales numbers further or quantify profitability in this country.

Grocers Loblaw Cos. and Metro Inc. have remarked heavy rivalry in the sector is keeping prices tight.

 

-- Financial Post

Republished from the Winnipeg Free Press print edition May 17, 2013 B15

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