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Same-Store Sales Trends for Walmart and Its Peers

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Revenue analysis for Walmart U.S. in 2Q16

Walmart U.S., the largest of Walmart’s (WMT) three segments, reported sales of $73.9 billion in 2Q16, up 4.8% over the previous year. Higher store sales were due to higher store traffic as well as higher ticket size. Store traffic rose 1.3% in 2Q16, while ticket size rose 0.2%. Walmart also opened 33 new stores net in the quarter, taking the Walmart US store count to 4,588.

Store traffic for Walmart and rival retailers such as Costco (COST) and Target (TGT) has been higher over the past year. It has been fueled by lower prices at the pump and the improved employment situation in the United States.

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Same-store sales growth

Walmart’s store comps (comparables) were up 1.5% year-over-year in 2Q16. Walmart’s neighborhood format stores reported comps of 7.3% in the quarter. Walmart is quickly expanding its network of smaller format stores, especially in urban areas, to better compete with the likes of Dollar General (DG) and Dollar Tree Stores (DLTR).

In contrast, Target (TGT), which reported 2Q16 results a day after Walmart (WMT), reported same-store sales growth of 2.4%. Costco (COST) reported US same-store sales growth of 5%, 6%, and 6% in the months of May, June, and July, respectively. These amounts don’t include fuel sales.

Merchandising performance

Target reported three times higher comps in its signature categories such as health and wellness, style, baby, and kids. That’s part of the restructuring focus the retailer undertook to turn around its fortunes.

Walmart’s health and wellness, apparel, and home merchandising categories also reported strong results, with comps rising in the mid-single digits. However, Walmart experienced some pressure in the pharmacy area. While scripts growth has been healthy, the pressure of reimbursement rates continues to dog the performance of pharmacy retailers. This factor affects results for drug retailers such as CVS Health (CVS) as well.

Walmart and Costco together make up ~2.0% of the portfolio holdings of the SPDR S&P Retail ETF (XRT) and 8.8% of the holdings in the Vanguard Consumer Staples ETF (VDC).

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