Store traffic trends
Walmart US (WMT) delivered its best comp growth in more than two years. Unlike the previous eight quarters, sales growth was boosted by higher store traffic, up 1.4% year-over-year. This is remarkable, as traffic declines have been common for Walmart and other retailers (XRT) in the face of stiff competition from online retailers like Amazon (AMZN).
This was the first quarter since 3Q13 when traffic trended positive for Walmart US. Traffic increases of 1.5%, year-over-year, also occurred for its Sam’s Club segment.
Oil price slump
Higher store traffic has been primarily induced by lower prices at the pump—it’s now cheaper to drive to stores. Traffic has also been induced by better weather, compared to the previous year. Last year’s cold snap affected store traffic for almost all industries and sectors, including retail. Lower energy prices in the quarter also resulted in positive comps for nearly all merchandising categories for Walmart in the US.
Sales comps were also helped along by higher e-commerce sales. For Walmart’s US segment, this push was estimated at 0.3%, while the Sam’s Club impact was estimated at 0.4%. A more detailed analysis of Walmart’s e-commerce performance can be found in Part 7 of this series.
On the other hand, Walmart’s (WMT) chief competitor in the grocery space, Kroger (KR), reported positive comps of 5.6% in the last quarter, excluding fuel. This was the 45th consecutive quarter of positive comps growth for Kroger, a remarkable record.
This record is all the more notable as Kroger operates mainly in the grocery space, which has a more limited product array than mass merchandisers Walmart, Target, and Costco. Kroger (KR) also has comparatively little help from e-commerce sales to churn sales growth, unlike Target (TGT), Costco (COST), and Walmart (WMT).
Walmart (WMT) and its peers Costco Wholesale (COST) and Kroger (KR) are part of several ETFs, including the SPDR S&P Retail ETF (XRT) and the SPDR Consumer Staples Select Sector ETF (XLP). Together, they constitute 13% and 3% of the portfolio holdings of XLP and XRT, respectively. As S&P 500 Index components, they constitute 1.2% of the portfolio holdings of the iShares Core S&P 500 ETF (IVV).