Asda sales continue to boost Wal-Mart
quarter driven largely by its European and South American
operations. In the UK the group's Asda division has continued its
success with strong store sales growth fuelling success.
Wal-Mart has announced a significant jump in sales for the third quarter driven largely by its European and South American operations. In the UK the group's Asda division has continued its success with strong store sales growth fuelling success.
Overall sales were up by 13 per cent adding $7.2 billion (€6.1bn) to the company's revenue.
With the improvement in the sales trend from the 11 per cent reported in the second quarter, the company reported that it felt better about the economic environment. However, a lot of the increase was the result of easier comparisons, with the group stressing the fact that consumers remain cautious.
From a sales perspective, August was the strongest month with September declining from that level, and October weaker still.
"All said, I don't think consumer spending is slowing but I also don't see the strength that many of you in the investment community appear to see,"
said a Wal-Mart spokesperson.
However the quarter was the first time in 8 quarters that the group's gross margin declined. Wal-Mart blamed the decrease on heavy markdowns to clear summer inventories.
The lower gross margin in the Wal-Mart division resulted in operating earnings growing at 10.8 per cent which was less than its sales growth of 12.8 per cent.
"On balance it was a good quarter but not the performance quality seen in the first half of the year," the spokesperson said.
However he added that sales for the Halloween and Christmas period are expected to significantly increase prospects for the fourth and final quarter.
Total sales for the corporation were up 13.1 per cent for the 3rd quarter and up 11.4 per cent year-to-date.
Total inventories, including international, were up 8.8 per cent on a sales increase of 13.1 per cent for the quarter. Inventories are up, in part, due to our efforts in global procurement which requires us to own the applicable inventory longer.
Inventories in the Wal-Mart stores were up in the low single digits. Comparable store inventories were actually down more than 2 per cent. On the other hand international inventories were up more than the increase in sales; however, a large portion of the increase was due to currency translations, the group reported.
International sales in the third quarter were $11.5 billion, up 15.7 per cent from the same quarter last year. The strongest sales performances came from Mexico, Brazil, the UK and Canada, which were all boosted by positive currency translation.
International sales for nine months were up 16.3 per cent over last year with currency translation accounting for a net increase of $1.2 billion. (12.1 per cent adjusted for the currency translation).
Operating profits for the quarter were $564 million, up 28.5 per cent on a 15.7 per cent sales against last year. The group said that its operating profits exceeded plan with good improvements in most countries. The third quarter impact of currency translation on operating profit was a positive $14 million.
In Mexico, total sales for the third quarter were up 9.1 per cent in real terms (inflation adjusted) over last year's level, while in Canada, sales in Canadian dollars are up in the high single digits for the quarter.
In Puerto Rico, total sales excluding Amigo, were above plan and up in the mid teens for the quarter, while in Argentina, Supercenter comps in real terms were up in the low double digits for the quarter. In Brazil, sales and operating profit were both reported to have "exceeded plan".
Asia faired least successful of all the group's international operations, with negative single digit sales comparisons during the quarter in South Korea and China.
In Europe, Germany sales and operating losses were behind plan although year to date operating losses were below last year's level, the group reported. Comparative sales were up in the low single digits for the quarter.
In the United Kingdom, sales growth was in the low double digits while comparative store sales grew in the high single digits. The increases were driven by increases in both customer count and ticket in approximately equal proportions.
Food sales at Asda continued to be strong, with comp store growth in the high single digits. Through the quarter, Asda outperformed the supermarket sector. As a result, food market share increased to 13.1 per cent - up 50 basis points over last year. Extra Special, Asda's premium food range, added 130 new items, taking the total to 360, with a further 100 to be launched before Christmas. Sales of extra special products have doubled over the last year.
During the quarter, Asda opened 3 new stores at Oldbury, Crawley and Harlow. The group has now opened 6 new stores this year, and all are trading strongly.
In addition, Asda has opened 7 expanded stores so far this year, including mezzanines at Govan, Cumbernauld and Sheffield - all of which were described as trading well.
Next Monday (November 17th) Asda will open 3 stores on the same day in Halfax, Edinburgh (Chesser) and London (Sutton). In aggregate, Asda will add an additional 700,000 sq ft this year.
In September, Asda launched a trial of a high street George concept in two locations. The group described initial performance as "encouraging".
In the quarter, Asda completed the rollout of auto, home and travel insurance, and initial results are encouraging. In addition it launched a trial of its first life Insurance offer in 40 stores.
Asda was also recognized as a good place to work during the quarter, with the trade publication "The Grocer" naming Asda as the most desirable employer in a poll of People Managers from a cross-section of UK retailers.
