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Walmart Posts Improved Results for Sam’s Club in Fiscal 1Q17

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Sam’s Club’s fiscal 1Q17 results

Walmart’s (WMT) Sam’s Club segment also performed better than expected in fiscal 1Q17. Its sales rose 1% to $13.6 billion in the quarter. Store comps growth excluding fuel sales came in positive at 0.1%, in line with the company’s guidance provided at the end of the previous quarter.

Same-store sales comps were, however, adversely affected by 50 basis points due to food price deflation. Walmart was successful with its e-commerce initiatives at Sam’s Club, however. These initiatives included Club Pick-Up, which rose 30% in the quarter.

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Membership trends

Membership income for Sam’s Club rose by nearly 4% in the quarter, with its Plus membership penetration rates nearing record highs. The retailer also recorded a Plus Member renewal growth rate of over 30% in the quarter.

In contrast, Costco (COST) reported a 3.6% rise in membership income in its last-reported quarter. PriceSmart (PSMT) also reported a 3.6% rise in membership income in its last-reported quarter.

In-store improvements

Walmart has been in the process of overhauling its US store fleet on the basis of clean, fast, and friendly ratings for its stores.

With most stores having cleared the quality hurdle, the company has been looking to attract and retain high customer traffic through its traditionally competitive product pricing and revised pay structure for its store associates.

Store traffic rose for the sixth straight quarter for Walmart US in fiscal 1Q17. However, Sam’s Club posted its third straight quarter of falling store traffic, though its online sales trends were stronger.

Walmart has been rationalizing its retail footprint in the last fiscal year. The retailer has closed down uncompetitive stores and formats both in the United States (OEF) (DIA) and abroad, and it has opened new stores to improve both the customer experience and generate higher returns on its capital employed.

Inventory management has also been a high-focus area for Walmart over the past few quarters. The retailer has focused on strategic merchandise additions, the disposal of obsolete items, and the prioritization of inventory shrink initiatives. Its inventory growth was slower than its sales growth last quarter.

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