Sam's Club Leads Walmart in Q2 Earnings

SHARE:

Email

Print

LinkedIn

Facebook

Twitter

August 23, 2011

Gone are the days of Sam’s Club being the problem child within Walmart’s family of stores. The warehouse club led the company in sales and earnings for the second quarter, fueled by its store brands.

Walmart’s U.S. stores saw sales grow just 0.4 percent for the three months ended July 31 and 0.5 percent for the first half of the fiscal year. But Sam’s Club soared, growing sales16.2 percent for the quarter and 13.9 percent for the first two quarters combined. Sam’s has enjoyed strong growth from new memberships, but is using store brands to build shopper loyalty. The retailer introduced three new lines this year and is rebranding 500 SKUs under the new store brands, shifting away from the Sam’s Club Member’s Mark label.

“We continue to deliver on our commitment to quality and value, especially with our proprietary brands,” said Brian Cornell president and CEO of Sam's Club, during Walmart’s earnings call with analysts. “Here are a few highlights: since the beginning of the year, we have introduced three new brands, Artisan fresh in deli and bakery, Simply Right in baby and health and beauty aids, and Daily Chef in frozen foods and refrigerated products. These new brands represent close to 100 items this month, with plans to roll out 400 more by the end of Q1 next year.”

The warehouse club began rolling out the new lines in March, beginning with Artisan Fresh and followed by Simply Right in June. Daily Chef rolled out in July. “Early sales and member feedback are overwhelmingly positive with results at or above expectations in all three brands,” Cornell said. “We had an outstanding second quarter. Sam's Club posted its sixth quarter of sequential improvement as comp club sales, excluding fuel, increased 5 percent, at the top of our range. Not only did we leverage expenses, but we also grew operating profit without fuel by 13.3 percent, much faster than the growth in sales.”

In contrast, comp store sales declined at Walmart’s U.S. stores by 0.9 percent (excluding without fuel). Notably, Walmart’s U.S. stores continue to struggle along with its customer base.

“I've recently observed several consumer focus groups, and it's clear that many consumers are still struggling. They're trading down to stretch their budgets, buying a lower-priced brand of detergent, moving from branded canned goods to private label and purchasing half gallons of milk instead of gallons,” said Mike Duke, Walmart president and CEO. “That's why we are laser-focused on investing in price to help our customers. There certainly are many reports on Walmart pricing and the fact is that the gap has narrowed in some cases. We're committed to widening the gap on price, and we have a specific plan and timetable to deliver EDLP [Everyday Low Price] to every customer.”

Walmart may be focused on price, but there was no mention of its private label program Great Value brand during the call with analysts. Recent financial gains from the chain’s re-introduction of national brands and re-instatement of Action Alley -- following the failure of Project Impact -- have leveled off for now. All eyes are on the all-important fourth quarter holiday season, with little emphasis on store brand support for growth.

Read These Related Articles:

• Game-Changing Store Brands Force Competitive CPG Action
• Wal-Mart Revamps Great Value to Give It Post-Recession Legs
• Profiles in Innovation: A&P's 'Green Way' to Sustainability (Part 3 of 4)
• Whole Foods Recalls Dozens of Store Brands Bakery Goods
• Hy-Vee Rolls Out Artisan Breads

Most Read

Guest Columns

Grocery Aisle Innovation Key to Retailer and Consumer Cost Savings

Retailers are redesigning the aisle, appealing to environmentally friendly consumers and capitalizing on market trends to make their private label brands more competitive.

Source: Tetra Pak Inc.

How to Develop a Private Label Expression Aligned with Retail Brand Strategy

By creating private label as a marketing tool rather than just a price alternative, retailers gain the opportunity to tell a complete brand story while simultaneously boosting customer loyalty.

Source: CBX

Using the Store Banner to Endorse Private Label Architecture

Although the economic downturn accelerated private label growth in Europe, there was another key driver -- retailers started to brand their stores.

Source: IPLC

See All Guest Columns »

Press Releases