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Why We’re Seeing Positive Trends For Mass Merchandisers

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Walmart’s revenues

Walmart (WMT) reported 4Q15 revenues of $131.6 billion and fiscal 2015 revenues of $485.7 billion. These were up 1.4% and 2%, respectively, from the corresponding period in the last fiscal year.

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Higher dollar

The US dollar has appreciated significantly over the past year. Between the end of 2013 and January 2015, the trade-weighted US dollar index rose 12.6%. This impacted results not only for Walmart, but also for other US consumer firms with significant operations abroad.

The company estimates an adverse impact on the top line of $2.6 billion for 4Q15 and $5.3 billion for fiscal 2015. Excluding the impact of currency movements, Walmart’s revenues rose by 3.5% for 4Q15 and 3.1% for fiscal 2015, year-over-year.

Same-store sales

Revenues were also impacted by positive same-store sales growth in the vital US market. Both Walmart US and Sam’s Club segments reported 0.5% comps growth for the year, excluding fuel for Sam’s Club. For 4Q15, US comps were even stronger, with Walmart US and Sam’s Club reporting an increase of 1.5% and 2%, respectively.

US comps benefited from lower energy prices at the pump, lower inflation, a competitive pricing environment, and an improving labor market, which we’ll discuss in Parts 9 and 10. Better weather compared to the previous year also helped. Last year’s polar vortex resulted in a bitterly cold winter.

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Mass merchandisers outperform

These factors also benefited Walmart’s fellow mass merchandisers, including Target (TGT), which beat sales estimates in 4Q15. Same-store sales grew 3.8% in the quarter, outpacing Walmart (WMT). Both Target (TGT) and Walmart (WMT) have faced sluggish same-store sales growth in recent quarters, so the turnaround was a welcome one. Costco Wholesale (COST), on the other hand, reported a jump of 8% in US same-store sales in the quarter ending February 15, 2015, excluding gasoline sales.

Walmart and its peer mass merchandisers Costco Wholesale and Target are part of several ETFs, including the SPDR S&P Retail ETF (XRT). They make up ~2.9% of the portfolio holdings of XRT. As S&P 500 Index components, Walmart, Costco, and Target together constitute 1.3% of the portfolio holdings of the SPDR S&P 500 ETF (SPY).

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