Softness in sales
A volatile macroeconomic environment and adverse foreign exchange movements have been putting pressure on Walmart’s top line in recent quarters. In fiscal 1Q17, which ended on April 30, 2016, Walmart’s overall revenue increased by 0.9% to $115.9 billion. The company’s fiscal 1Q17 revenue was impacted by $3.5 billion of currency headwinds. Walmart’s revenue declined in three out of four quarters in fiscal 2016.
To increase its store traffic, Walmart has been strengthening its merchandise offerings in key categories such as fresh food. The company is also expanding its assortment of organic foods, healthy snacks, and easy-prep meals. Walmart is also trying to enhance sales in its international locations through improvements in price and product availability.
The iShares U.S. Consumer Services ETF (IYC) has 3.8% exposure to Walmart.
The company’s Sam’s Club segment is attempting to boost its sales through improved omnichannel capabilities, private brands offering, and health and wellness products.
Walmart is also focusing on optimizing its Supercenter and Neighborhood Market store formats. In fiscal 2016, Walmart opened 69 Supercenters, including relocations and conversions. In fiscal 2017, Walmart plans to open 50–60 Supercenters, including relocations and conversions.
The company opened 146 traditional-format Neighborhood Markets in fiscal 2016. Neighborhood Markets are smaller stores that provide customers the convenience of accessibility and low prices. Neighborhood Markets delivered same-store sales growth of 7.1% in fiscal 1Q17. In fiscal 2017, Walmart plans to open 85–95 Neighborhood Markets.
The growth of Neighborhood Markets will help Walmart in competing with Dollar Tree (DLTR) and Dollar General (DG), both of which have an extensive presence in the US market. As of the end of April 2016, Dollar General operated 12,719 stores in 43 states. Dollar Tree operated 13,997 stores across 48 states and five Canadian provinces as of April 30, 2016. Walmart’s peer Target (TGT) has also been exploring multiple store formats, including small, flexible format stores that are generally smaller than 50,000 square feet. These flexible format stores offer edited general merchandise and food assortments.
In fiscal 1Q17, Walmart opened 13 Supercenters (including conversions and relocations) and 20 Neighborhood Markets.
In the next part of this series, we’ll discuss how Walmart is enhancing its online capabilities.