retail news in context, analysis with attitude

Walmart yesterday said that it had second quarter revenue of $120.2 billion, a half-billion-dollars higher than forecast, on US same-store sales that were up 1.5 percent. Still, the Wall Street Journal writes, " the retail giant reported that second-quarter profits fell to $3.48 billion, down 15%, from a year earlier. The company cited higher costs from adding store hours and raising hourly worker pay, among other factors. Total e-commerce sales rose 16% in the quarter ending July 31, down from 17% in the first quarter and 22% a year ago, the company reported."

In addition, MarketWatch writes, "Greg Foran, president and CEO for Wal-Mart U.S. said on the earnings call that 'accelerating pressures in shrink' were one of three major factors that contributed to the company’s underperformance. The others were an overall decline in gross margin, and in particular, lower than expected pharmacy reimbursements."

The story goes on to say that "despite media reports beginning in 2013 of store 'out-of-stock' situations, the company’s stated goal has been to grow inventory less than sales. That goal has now been accomplished. Total inventory grew 2.2% in the second quarter, which is slower than the 4.8% sales growth that unit reported, and comparable-store inventories fell by 2.4% compared to the 1.5% sales growth."
KC's View:
The thing that Walmart seems to be pleading for the most in this case is patience ... because that's what its leadership seems to think it needs the most. It will take time for its investment in e-commerce to pay out, it will take time for its adjusted approach to employee pay to find the appropriate levels, and it will take time for the 21st century Walmart to take shape and find the right balance. Of course, in the modern business environment, time is not something that most companies have...

I do think that Walmart's emphasis on inventory management could be problematic if it appears to shoppers that it is resulting in out of stocks and holes on the shelves. We'll have to see how it plays out.