Wal-Mart sales up but Asda performance below par

By Anita Awbi

- Last updated on GMT

Related tags: Wal-mart

Retail giant Wal-Mart has announced a solid 9.5 per cent rise in
net sales for the year-end, despite a continued poor performance
from Asda in the UK.

An outstanding year in Latin America and conservative sales increases in the US allowed the company to maintain steady profit growth throughout 2005, but German and UK performance was disappointing.

Wal-Mart's US comparable store sales were up 3.04 per cent, with a total operating income of $15.324bn (€12.891bn), up 8.2 per cent from the previous year. But the company is feeling the pressure from increasing freight and utilities costs it said, and has worked hard to cut costs.

Meanwhile Asda had negative comparable store sales for the last quarter and year-end, bringing a below estimate performance for the division despite an aggressive pricing strategy.

Asda is struggling to maintain its 16.7 per cent market share, only half a percent ahead of rival firm Sainsburys. Due to stagnant sales over the last 12 months many speculators believe Britain's number two supermarket will be overtaken by Sainsburys in the near future.

Sainsburys plans to double the amount of new space it opens each year and put months of work into planning its recent January sale, which challenged main rivals Asda and Tesco in the non-food stakes by slashing the prices of items such as televisions and kitchenware.

But for Wal-Mart Germany, higher than expected operating losses came as a disappointment to the company that has seen a shift in its European fortunes. The weakening of the pound and euro added to the negative impact on sales, management said.

David Wild, president of Wal-Mart Germany, said the division will close three stores in Dusseldorf-Reisholz, Sigmaringen and Muehldorf, leaving 85 hypermarkets open across the country.

Overall, the international section saw an 11.4 per cent increase in operating income, from $2.9bn in 2004 to $3.33 in 2005.

Performance was bolstered by impressive sales growth at its Wal-Mex superstores across Mexico. The sector enjoyed a massive 25 per cent increase in sales and 14.8 per cent rise in operating profit.

Globally, Wal-Mart is the leading food retailer with net sales of $312bn and employs 1.5m workers in 15 countries.

Related topics: Market Trends

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