Deflation hurts Walmart, but it looks for relief
February 21, 2010
Food deflation hit Walmart, Bentonville, Ark., during the fourth quarter and fiscal year ended Jan. 31, contributing to a comparable store sales declined at its namesake stores in the United States.
Although earnings beat analyst estimates, comparable store sales at Walmart U.S. stores fell by 2.0% in the quarter and 0.2% in the year, the company announced. Sam’s Club, in contrast, enjoyed a 0.7% gain in the quarter and a 1.4% advance for the year. In both cases, comps are without fuel.
Grocery prices declined by about 90 basis points in this year’s fourth quarter, said Eduardo Castro-Wright, Walmart’s vice chairman, in a company conference call last week. Yet, he added that Walmart’s performance is on par with grocery stores that offer food, consumables and pharmacy sales, and provide comp results.
He also noted that Walmart’s Great Value private label is enjoying solid mid-single-digit sales increases. He added that the Great Value numbers “compare very favorably to the overall grocery flat comp.”
Food deflation should begin to ease in the second quarter of this fiscal year, Castro-Wright said.
Overall, Walmart net sales for the fourth quarter of fiscal year 2010 were up 4.6% to $112.8 billion versus the year earlier. Diluted earnings per share were $1.23 versus 96 cents in the fourth quarter last year. Adjusted earnings were $4.5 billion, or $1.17 per share, which exceeded an analyst estimate of $1.12.
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