Higher Footfalls Benefit Mass Merchandisers Walmart, Target

Strong traffic trends boost Walmart’s and Target’s top line in fiscal 3Q16

Walmart’s (WMT) performance for its US segments was better than the overseas segment, continuing on its strong performance over the past year.

  • Sales rose 3.8% for Walmart US to $72.7 billion in fiscal 3Q16, driven by higher store traffic and new stores.
  • Sales for Sam’s Club declined by 2.2% to $14.1 billion, including fuel sales, reflecting the decline in energy prices. Sales, however, rose 1.8% excluding fuel.

Higher Footfalls Benefit Mass Merchandisers Walmart, Target

Traffic drivers

Lower gas prices have been a key driver attracting store traffic for Walmart, Target, and their US competitors over the past few quarters. Both Walmart US and Target reported their fourth straight quarters of rising traffic. Store traffic rose by 1.7% for Walmart US and by 1.4% for Target (TGT) in fiscal 3Q16.

Walmart’s been trying to improve customer satisfaction scores by setting higher store standards in terms of cleanliness and faster, friendlier service from associates. About 70% of Walmart’s US stores now meet the new standards, according to Doug McMillon, CEO (chief executive officer) of Walmart.

That said, store traffic for Sam’s Club declined by 0.3% in fiscal 3Q16, driven by lower visits by business members. Walmart’s also targeting a new growth strategy for Sam’s Club to boost sales, including a focus on higher-income consumers and higher-value businesses, and more targeted merchandise and offers. It’s also looking at newer products and providing value to drive future sales.[1. according to comments by Rosalind Brewer, president and CEO of Sam’s Club]

Signature categories

Target’s focus on signature categories of style, babies, kids, and wellness was instrumental in driving higher traffic and sales for the quarter. The retailer reported accelerating traffic trends in fiscal 3Q16. Other retailers focused on wellness and organics. Sprouts Farmers Market (SFM) reported strong traffic trends in the last quarter.

Comparable sales

The next article discusses Walmart’s and Target’s store comp performances in the quarter, a key metric for assessing retailer performance.

Walmart constitutes 1.1% of the portfolio holdings of the iShares S&P 500 Value ETF (IVE) and 2.9% of the iShares Global Consumer Staples ETF (KXI).