Despite progress on several key merchandising initiatives during the first quarter, it wasn’t enough to prevent Walmart from logging a 1.1% decline in same-store sales, losing customer traffic and introducing the possibility the second quarter will bring more of the same. The company’s forecast for second quarter same-store sales envisions a range of possibilities between a 1% decline and 1% increase.
Walmart turned what appeared to be some fairly grim news on the U.S. sales front into a message of inspiration by pointing out that growing comps is the senior management’s highest priority, and positive results are being realized in areas where strategic initiatives have been in place the longest.
“We’re focused on delivering [every day low prices] and a wide assortment, and customers are responding favorably where we’ve made the most progress on executing the plans,” said Wal-Mart Stores, Inc., president and CEO Mike Duke.
Where the company has made the most progress in terms of restoring items to its product assortment is in the food and consumables area, and Walmart’s U.S. president and CEO Bill Simon highlighted that comps in food grew in the low single digits, with inflation adding about 1% to the comp.
“Our food business is delivering positive sales growth that’s on par with the top competitors and we’re seeing recovery in our consumables business,” Simon said. “Customers are responding positively as we expand our merchandise assortment, adding back items across all categories. As we add more SKUs throughout all categories, we expect to gain further traction, improving both traffic and ticket.”
The improvement process takes time though especially in product categories with longer lead times, such as those that are imported. If Walmart manages to generate a positive comp in the second quarter it will end a disappointing and embarrassing sales slide for the company. However, the best case scenario of a 1% increase envisioned in guidance would hardly be cause for a victory lap. The second quarter marks the first period in which Walmart begins lapping two prior quarterly periods of negative numbers. That simplifies the challenge of producing positive comps but also makes it more challenging to determine how much credit the company’s strategic initiatives deserve for whatever growth may materialize.