Sales, Margins and Stock Price All Up -- but What's the Reason Behind the Marketing and Merchandising Miracle?
By Jack Neff /Published: October 06, 2008
BATAVIA, Ohio (AdAge.com) -- Looking for a silver lining in the economy? It's shining brightly from Bentonville, Ark.
Same-store-sales growth for Wal-Mart Stores is well ahead of dismal levels a year ago. Amazingly, Wal-Mart's margins are up too. And the stock has soared more than 30% in the past year, trading at levels not seen since the turn of the millennium, providing hope that CEO Lee Scott can avoid a net loss during his reign. Wal-Mart has become a popular defensive buy for investors and consumers alike.
The big question: Is Wal-Mart's recent run of improved results more about the marketing or the economy? Most signs point to the economy, though economic distress has dovetailed nicely with the marketing.
An acid test will come Oct. 9, when Wal-Mart releases sales numbers for September, in many ways the worst, or at least scariest, month the U.S. economy has seen since the Great Depression.
But so far Wal-Mart looks to have pulled off a marketing and merchandising miracle, raising same-store sales at its namesake U.S. division at rates considerably better than its one-point-at-best improvement during the past two recessions.
Return to value
After flirting with fashion, organics and sushi in 2006, Wal-Mart returned to its price-focused, downscale roots in 2007. In came the Martin Agency and "Save money. Live better." Out went marketing and merchandising executives with more-upscale ambitions, like so much marked-down merchandise.
By this year, the shift appeared to have paid off. Wal-Mart reported 3.1% same-store-sales growth (excluding gasoline) in the 30 weeks ended Aug. 29, more than three times the 0.8% rate a year ago. It's doing far better in the U.S. than all department stores, the vast majority of specialty stores and its nemesis Target, which has seen consistently declining same-store sales this year.
Yet the Wal-Mart marketing miracle starts to fade on closer examination of the numbers. Its gains started to slow in August as economic stimulus checks stopped arriving, and some of its biggest competitors with similar merchandise configurations did far better.
U.S. Wal-Mart stores had same-store-sales growth of 2.8% in August, while Costco's same-store sales were up 5.5% excluding fuel, and BJ's Wholesale Club saw same-store sales rise a whopping 7.7% without gas. Wal-Mart's own Sam's Club -- which, like its competitors, does light to nonexistent media advertising aside from direct mail -- saw same-store sales rise 4.2%.
Even supermarket retailer Kroger Co. saw same-store sales grow 5% in August. Kroger Chairman-CEO David Dillon said on a Sept. 16 conference call that Kroger's year-over-year product-cost inflation was 4.9%, accounting for almost all that gain.
Inflation factor
It's not clear what the overall inflation rate was for Wal-Mart in August, though Eduardo Castro-Wright, CEO of the U.S. Wal-Mart division, said last year that the chain's rate was a percentage point below that of grocery competitors. Even at 3.9%, Wal-Mart would have gotten essentially all of its same-store-sales increase and more from inflation alone. Just applied to Wal-Mart's business in grocery, personal-care and health products, 3.9% inflation would account for 2.2 points of Wal-Mart's 2.8% same-store growth.
And given the acceleration of food and package-goods inflation in the past year, Wal-Mart actually may have started losing ground in August. Its 2.8% same-store gain was the same as it was a year earlier, when inflation was lighter.
But while stagflation is Wal-Mart's friend, its executives say their strategy and execution are helping too. "We are seeing investment made in our three-year strategic plan to strengthen our business pay off," Mr. Castro-Wright said on an August conference call. He added: "Our price-leadership position continues to ensure customer loyalty and drive new customers to Wal-Mart."
A Wal-Mart spokesman declined to comment for this story beyond public statements made by company executives.
Yet it's far from clear Wal-Mart is winning loyalty or new customers, even as it wins more business. A June report by Information Resources Inc. based on consumer-panel data found that household penetration for Wal-Mart Stores declined 0.9 percentage points in the first quarter, accelerating declines that began last year as Wal-Mart began slowing new-store expansion.
Package goods
......(文章未完)
只有会员才能访问
如想阅读全文请先以会员身份登录
SUBSCRIBE NOW FOR FULL ARTCILE ACCESS
(责任编辑：zj)
所属专题：金融海啸冲击全球 零售业几家欢乐几家愁
