Wal-Mart cuts earnings forecast again amid price wars with grocery, dollar stores

Wal-Mart Stores Inc. (WMT), the world’s largest retailer, cut its annual profit forecast for the second time since August as the uneven economic recovery and increased competition from dollar stores hurt sales. The shares fell.

Profit per share in the year ending January 2014 will be $5.11 to $5.21, excluding items such as store closings in Brazil andChina, Bentonville, Arkansas-based Wal-Mart said today in a statement. The midpoint of the range trails analysts’ average estimate of $5.19. The company forecast $5.10 to $5.30 three months ago and profit as high as $5.40 in February.

Chief Executive Officer Mike Duke is trying to improve Wal-Mart’s grocery selection and keep prices low to fend off smaller-format stores that offer merchandise starting at $1, all while consumers restrain spending because of unemployment and higher taxes. Sales at Wal-Mart U.S. stores open at least 12 months excluding fuel fell 0.3 percent in the quarter ended Oct. 25. Analysts predicted they’d be little changed.

Related News:

• More Americans Than Forecast File Unemployment Claims
• Yellen Says Economy Performing ‘Far Short’ of Potential

“In retail, it comes down to same-store sales, and today was another disappointment,” Brian Yarbrough, an analyst at Edward Jones & Co. in St. Louis, said today in an interview. “On the fringe, they’ve got to be losing customers.”

He recommends buying the shares.

Wal-Mart’s U.S. same-store sales have slid for three straight quarters as a 2 percentage point increase in Social Security taxes reduced spending among its shoppers, many of whom live paycheck to paycheck. The 16-day federal government shutdown that ended Oct. 17 also has damped consumer confidence. The Thomson Reuters/University of Michigan index of consumer sentiment dropped to the lowest level in almost two years this year month.

Inventory Growth

Wal-Mart, which has a corporate goal of keeping inventory growth at or less than the rate of net sales growth, scaled back its orders from suppliers for the third and fourth quarters to keep inventory from rising too quickly, according to an e-mail from ordering manager at the company’s headquarters that was obtained by Bloomberg News.

In response to the report in September, the retailer said it felt good about its inventory position and was managing it appropriately. The order pullback wasn’t across the board and was happening “category by category,” David Tovar, a spokesman, said at the time.

U.S. inventory increased 5.1 percent, Bill Simon, the company’s U.S. CEO, said today on a conference call. While that was slower than the 6.9 percent inventory gain in the previous quarter, it was faster than third-quarter U.S. net sales growth of 2.4 percent.

Shares Fall

Wal-Mart shares rose 0.4 percent to $79.21 at 10:56 a.m. in New York. The stock had gained 16 percent this year through yesterday, compared with a 25 percent increase for the Standard & Poor’s 500 Index.

Net income in the third quarter rose 2.8 percent to $3.74 billion, or $1.14 a share, from $3.64 billion, or $1.08, a year earlier, the company said. The average of 26 analysts’ estimatescompiled by Bloomberg was $1.13. Revenue increased 1.7 percent to $115.7 billion, trailing the $116.8 billion average projection.

Sales at Menomonee Falls, Wisconsin-based Kohl’s Corp. (KSS) also trailed analysts’ estimates, falling 1 percent to $4.44 billion, compared with the $4.55 billion average projection. The shares slid 7.3 percent to $53.99.

Sales in Wal-Mart’s international division increased 0.2 percent to $33.1 billion. Excluding the effect of foreign-currency fluctuations, sales would have risen 4.1 percent to $34.4 billion.

China Strategy

The company has been working to reintroduce its everyday low price strategy in Brazil and China after struggling to find strong sales growth in both markets. Wal-Mart said last month that it plans to add as many as 110 stores over three years in China, while shutting some outlets and remodeling dozens more. The retailer also named two new managers, in business development and real estate, to its China team last month.

The U.S. Department of Justice and the U.S. Securities and Exchange Commission are investigating allegations that Wal-Mart systematically bribed Mexican officials so it could more quickly open stores in the country. Federal and local government agencies in Mexico also are involved in investigations. Wal-Mart said in a November filing that it also has started inquiries into potential violations of the FCPA at operations in Brazil, India and China.

The company said today that expenses related to probes of those possible violations of the Foreign Corrupt Practices Act were $69 million in the quarter, less than its guidance of $75 million to $80 million. Those expenses will be about $75 million to $80 million in the fourth quarter.

Third-quarter sales in Wal-Mart’s Sam’s Club warehouse division rose 1.1 percent to $14.1 billion.

To contact the reporter on this story: Renee Dudley in New York at rdudley6@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

Innovation becomes key as grocery competition intensifies

Supermarkets are undergoing some of their greatest changes since they came to the fore in the 1940s and 1950s, according to a new report from market researchers Packaged Facts. Indeed, while “The Future of Food Retailing: Shopper Insights and Market Opportunities,” report reiterates a great many of the same observations we make on a daily basis on both our website and print editions, it also provides additional color to enhance its findings.

“Economic, demographic, lifestyle and technological changes have created not only a fertile environment but the absolute necessity for new concepts to engage shoppers, capture share of stomach, and re-invent food and beverage retailing,” says David Sprinkle, research director for the Rockville, Md.-based market research firm. While the greatest competition to supermarkets and grocery stores comes from supersized, one-stop shopping venues like supercenters and warehouse clubs, the threat has spread out across myriad retail channels, including drugstores, dollar stores, limited assortment chains, and (the elephant in the room) online grocery shopping.

However, while supermarkets remain the majority force in food shopping, Sprinkle says, “They are no longer calling the shots” for the roles now shared with Whole Foods and Trader Joe’s on the natural/specialty side, Walmart, club stores and dollar stores on the value front, and farmers markets and food trucks in trend-setting.

At the same time, 2012 and 2013 have been big years for mergers and acquisitions in the retail food industry, as strategic buyers and private investors seek a way to expand their businesses to additional markets. Further, while the economy has shown positive signs of recovery in the past year, many consumers remain buffeted – if not traumatized – by higher gas prices, rising food prices, mounting healthcare costs and increased payroll taxes. Accordingly, most folks continue to feel economically squeezed and spending-shy, a fact that most grocery execs are acutely aware of – and how.

Other noteworthy insights from the report that caught my eye:

- Although many grocery shoppers are operating within a short time horizon, for most people grocery shopping is an activity that involves preparation. A substantial majority of grocery shoppers (85 percent) report that they do some kind of planning beforehand, according to Packaged Facts Food Shopper Insights survey data. Only 37 percent of grocery shoppers say they often stop by the grocery store on the spur of the moment.

- That’s in large part because saving money remains a key consideration. Two out of three grocery shoppers agree with the statement: “I buy a lot of groceries that are on sale or promotion.” Moreover, almost half (47 percent) used coupons or coupon codes during their most recent grocery shopping trip, 42 percent checked store circulars, 31 percent used store savings clubs/loyalty cards, and 11 percent used coupon matching services (such as double coupons).

- Even if the vast majority (83 percent) of shoppers say they are satisfied with the store(s) where they usually shop for groceries, only slightly more than half (56 percent) enjoy grocery shopping, and 18 percent actively dislike grocery shopping.

- The slippage suggests that retailers can do much more to make the task of grocery shopping easier, less burdensome, and maybe even pleasurable for a significant proportion of their customers.

For more information, visit www.MarketResearch.com.


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Publix Challenges Wal-Mart on....Low Prices?

Publix The Walmart Slayer Wins Another Round With Low Prices

Publix is many things — favored among shoppers for quality store brands, customer service and well kept stores — but a low-price leader it typically isn’t. But the grocer Forbes recently dubbed “the Walmart slayer” is pushing ahead with its own campaign comparing Publix prices to the discounter and telling shoppers how much they can save shopping at Publix.

“Walmart doesn’t always have the lowest price,” declares Publix’s weekly ad. “Save $31.45 this week at Publix.”

It’s just another round fired in the volley between Walmart and regional grocery operators. In 2012, Walmart started running ads comparing its prices to competitors and in some cases naming regional chains. This Spring, Publix started fighting back with billboards and ads challenging Walmart’s low price claims.

“All the supermarkets have gotten smarter about how their competing against Walmart,” says Neil Stern, senior partner with McMillan Doolittle, a retail consultancy. “They’re being smarter and more strategic in the way they fight them.”

Many retailers like Publix have decided it’s better to come close to Walmart’s pricing on a list of roughly 500 essential items. It means less margin, or profit, but they try to make it up on items that matter a little less, says Stern.

This focus on price for Publix isn’t new, but the public display is. Many years ago, Stern and I conducted a series of pricing studies in the Atlanta market. We compared like items or price per unit across several stores including Walmart, Target TGT +0.1%, Kroger KR -0.1% and Publix. In nearly every instance, Publix had higher prices by a considerable margin.

The studies were published in a retail trade magazine and inevitably we heard from Publix CEO at the time, Charlie Jenkins. Not to argue the point, but to request the shopping list and more details. Jenkins was more interested in correcting pricing discrepancies and perception than debating the veracity of our claims.

Always the sign of a successful leader.

Price isn’t everything but when a popular retailer with the perceived edge on quality and service can also match the low-price leader, it’s an advantage that’s hard to beat.

Kroger, Macy's Among Nation's Top 20 Retailers - Check Out The List

The top 20 retailers ranked by 2012 U.S. sales were Wal-Mart, Kroger, Target, Walgreen, Costco, The Home Depot, CVS Caremark, Lowe's, Best Buy, Safeway, McDonald's, Sears Holdings, SUPERVALU, Publix, Amazon.com, Macy's, Rite Aid, Ahold USA/Royal Ahold, Delhaize America, and Kohl's.

Two Cincinnati-based companies – The Kroger Co. and Macy’s Inc. – remain entrenched on a list of the nation’s largest retailers for U.S. sales.

The National Retail Federation’s STORES magazine lists Kroger as the nation’s No. 2 retailer reporting more than $92 billion in sales last year and Macy’s was the No. 14 retailer with $26.3 billion in sales.

London-based Kantar Retail compiled the data.

Kroger remained No. 2 on the list from a year ago while Macy’s jumped two spots on the list.

Sales for Kroger rose 6.6 percent and its store count dipped 1 percent to 3,538 from 2011.

Sales for Macy’s rose 4.9 percent from 2011 while it gained one store to stand at 841.

Based on 2013 projections, Kroger is expected to maintain its position as the nation’s No. 2 retailer and Macy’s is expected to rise to No. 13 in the country.

Kroger could rise to be the world’s fifth largest retailer based on sales projections for the 2013 calendar year, based on data provided by Kantar Retail.

Walmart remains the nation’s and the world’s largest retailer as it generated $467.9 billion of sales worldwide. An estimated 70.3 percent of company’s sales were in the United States.

(Original article written by Bowdeya Tweh for cincinnati.com and can be located here)

P&G and Walmart Colab "Family Movie Night" - A Model Example of Consumer Insights Meets Entertainment = Increased Market Growth (By William Thompson)

P&G and Walmart Colab "Family Movie Night" - A Model Example of Consumer Insights Meets Entertainment = Increased Market Growth (By William Thompson)

I recently stumbled across this project from 2011 between P&G and Wal-Mart, which, to be frank, I found very interesting, intuitive and overall brilliant in it's strategy and implementation. Having operated and being published in the Entertainment Law arena, I'm quite well aware of the headache (and overall puffery) of the "whose product/image association is worth what" dances　involving product placement or usage and infringement issues. Being somewhat of a stats lover, I was often amazed and how often positive correlation claims were proffered up as fact by party opponents, and when questioned, lacked adequate (or often any) statistical relevancy that showed even a minuet possibility　of a positive correlation between product placement/usage and favorable opinion by viewers (let alone a link between　placement and determinable income for damages).

This project, however, not only goes the total opposite route (which is a golden deal when compared to dealing with "after the fact" negotiations,　but likewise　utilizes a product/category strategy that created tangible revenue growth through a socially positive creation that funded the　production of a cinematic piece of art and had very, very, very minimal obtrusiveness into the artistic creation process. But, best of all, was　VOID of actual product　placement.　

Anyhow; very impressive.　(The case study is currently unavailable online due to site reconstruction, but you can request one from Effie.org by sending a case study request

here.) Below is an article from 2011 on the project from the P&G Newsroom (Original release can be located here.)

P&G and Walmart Celebrate 1 Year of Family Movie Night Announcing More Great Entertainment Thru 2012

Thursday, April 14, 2011 2:31 pm EDT

Last April, P&G and Walmart kicked off the Family Movie Night initiative when we presented the premiere of "Secrets of the Mountain." This Saturday, April 16, 2011, P&G and Walmart are celebrating a year of family entertainment with the premiere of our next Family Movie Night film, 'Truth Be Told' at 8/7c on FOX. In the past year, Walmart and P&G's Family Movie Night has been welcomed into homes across America 16 million times and we're happy to announce we'll be extending Family Movie Night into 2012, with four more films this year following "Truth Be Told."

P&G and Walmart initially decided to partner on Family Movie Night last year when industry research showed that parents wanted more options for television programs they could watch with their entire families. Today P&G and Walmart revealed [link to news release] results of new research they conducted which reinforces that parents are still seeking more family entertainment options. We learned that entertainment is a primary way families get together, in fact 81% of those surveyed told us they enjoy watching movies with their families and 75% of them admit that they still have to dive for the remote to change the channel or pause a program because of inappropriate content during what they thought was a "family" program. We're proud that Family Movie Night continues to offer parents films that can be enjoyed by the entire family without concern over questionable content.
Please click the video below to hear what the stars of the Family Movie Night films think of our initiative.
Celebrating 1 Year of Family Movie Night

To see a sneak peak at of "Truth Be Told" please watch the clip below. We hope you tune-in to enjoy it on April 16, at 8/7c on FOX!

Truth Be Told Trailer

To learn more about Family Movie Night you can visit www.familymovienight.com or www.facebook.com/familymovienight.