Reading between the lines
Have you noticed lately how discussions of the Sam’s Club business include references to Sam’s international presence? First it was Sam’s president and CEO Brian Cornell during the fourth-quarter conference call when he said, “We continue to see growth in the Sam’s Club brand in our international markets as Doug (international division president and CEO Doug McMillon) and his team opened 14 new Sam’s Clubs this fiscal year. We continue to work with the international team to share best practices across the organization to ensure we’re meeting our members’ need both in the United States and around the world.”
Then, earlier this week at an investor conference in Orlando, Cornell was talking about Sam’s international presence again.
“We now have a significant presence outside the U.S,” Cornell said, referencing Sam’s 139 international units concentrated in China, Mexico and Brazil. “We have more than 100 clubs in Mexico.”
The international connection has even crept into the boiler plate language in Sam’s press releases.
This is all quite curious because Sam’s financial results do not include the performance of the international units, and prior to the arrival of Cornell none of the division’s other CEO’s commented on international because it wasn’t their area of responsibility.
Could that situation be changing? Some type of restructuring to that would have Sam’s International operations reflected in the division’s results could make sense, assuming Wal-Mart Stores Inc. is interested in unlocking the shareholder value that resides in the $50 billion division that ranks as the eighth largest retailer in the United States. Doing so would certainly allow Sam’s to tell a more compelling growth story, especially considering the potential that exists in China and Brazil. Sam’s would then posses multiple growth drivers, a domestic remodeling program and member upgrade cycle being others, that would be appealing to investors should some type of transaction be in the works that would create an alternate ownership structure for Sam’s.
Report: Consumer confidence drops to lowest level in a month
Washington, D.C. — A report released Thursday showed that consumer confidence fell last week to the lowest level in a month, negatively impacted by rising fuel prices.
The Bloomberg Consumer Comfort Index dropped to minus 44.5 in the week ended March 6, from the prior week’s minus 39.7, which was close to the highest in almost three years. Surging gas prices have left Americans concerned about personal finances.
“Rising gasoline prices extracted a toll,” Joseph Brusuelas, a senior economist at Bloomberg LP in New York City, told Bloomberg. “Those at the lower end of the income ladder and those in the middle are being squeezed by rising costs of fuel and food, which does not bode well for discretionary spending.”
Same-store sales gaining momentum
Speaking at the Raymond James and Associates investor conference earlier this week in Orlando, Sam’s Club president and CEO Brian Cornell reaffirmed that Sam’s would achieve its first-quarter sales plan that calls for comp growth in the range of 1% to 3%.
Cornell wasn’t sticking his neck out too far with that claim, as sales for all of February and early March were in the books at the time of his comments. However, if Sam’s wants to continue demonstrating the type of upward momentum achieved throughout 2010 it will need to come in at the high end of its guidance range. More specifically, Sam’s would need to achieve a gain of 2.7% or better, as that was the rate of same-store growth in the fourth quarter. That was on top of a 2.4% increase in the third quarter, a 1% increase in the second quarter and 0.7% in the first quarter.
Cornell contends Sam’s sales growth will come from a combination of remodeling, opening and expanding clubs, enhancing member value, leveraging insights and gaining market share from competitors. He talked about getting up everyday focused on direct competitors such as Costco and BJ’s, but added, “We also recognize that a significant amount of growth we are fighting for comes from the food, drug and mass channels.”
Aside from his comments about sales and trade channels that will serve as a source of market share gains, Cornell’s presentation was filled with generalities that would seem to be of little use to investors. He talked about how Sam’s understands who its member is and is focused on serving them category by category. He noted that technology will continue to play an important role in the future of retail and rising gas prices and a high unemployment rate are impacting the market.