China, Brazil, and UK Drag Down Walmart’s Sales in Fiscal 3Q16

Walmart’s sales in 3Q16: International performance overshadows US gains

Walmart’s (WMT) international sales declined 11.4% in reported terms to $29.8 billion in fiscal 3Q16. But Walmart’s sales in fiscal 3Q16 were up 3.2% in constant currency terms. The company’s strong performance in Mexico and Canada, which clocked comps (comparables) growth at 6.3% and 4.3%, respectively, was overshadowed by headwinds in the Chinese, UK, and Brazilian markets.

The decline in operating profits wasn’t as apparent, as profits fell 6.4% in reported terms to $1.3 billion but were up 8.5% in constant currency terms.

China, Brazil, and UK Drag Down Walmart’s Sales in Fiscal 3Q16

China’s performance

Store comps declined by 0.7% in China (FXI) in fiscal 3Q16. Lower demand and higher competition from brick-and-mortar as well as online retailers affected sales figures in China. Walmart’s sales growth of 2.9% in constant currency terms came in due to new store openings.

However, Walmart reported an increase in market share in the hypermarket channel for the 11th straight quarter. Operating profitability also rose in China in fiscal 3Q16, according to David Cheesewright, CEO (chief executive officer) of Walmart International.

The overall market share of Walmart has been in decline, according to Kantar Worldpanel. Competition in the e-commerce space is tough as well, from well-entrenched online retailers such as Alibaba’s Tmall (BABA) and JD.com (JD).

Other US retailers such as Macy’s (M) and Costco (COST) have connected with Tmall to offer products online in China. The company’s future investment focus is likely to remain on enhancing omnichannel capabilities.

The United Kingdom sees deflation trends

UK (EWU) comps and sales declined by 4.6% and 3.2%, respectively, in fiscal 3Q16 due to lower traffic and a decline in ticket size. Higher competition from discounters Aldi and Lidl resulted in shrinking market size and a lower share for Walmart and several other competitors in the space.[1. source: Kantar Worldpanel]

Brazil performance

Economic headwinds continued to impact Walmart’s performance in Brazil (EWZ) in 3Q16. Sales and same-store sales were down, as the company battled a declining share in the hypermarket format during the quarter. Operating margins also declined due to higher wage and utility costs and higher promotional activity. Walmart’s e-commerce sales in Brazil were also challenged, putting a dampener on its overall web performance.[1. according to comments by David Cheesewright, CEO of Walmart International]

In the next article, we’ll look at Walmart’s and Target’s e-commerce performances.