So it is with a heavy heart that I must reveal this as my final Walmart blog here at Planet Retail before I move on to pastures new. Although I cannot see the tears dripping into your keyboard, nor hear your wretched sobs of despair or witness the rending of your garments, I can only guess at the misery that this revelation has caused.

Despite the fact that less than half a dozen of you have bothered to submit comments and that the frantic levels of debate and discussion on this forum have reached a fevered crescendo akin to a narcolepsy convention, there really can be no measure of the yawning chasm that the cessation of this blog will leave in your hollow, tawdry lives.

So, while some of you might consider self-harming or drug abuse in a desperate attempt to alleviate the genuine sense of bereavement that the end of this blog must be causing, I can provide solace through a collection of facts, figures and photographs as scant crumbs of consolation. Some of these facts & figures might even be true. Most importantly, I can also furnish you with one last helping of the searing insight and opinion that has made this blog quite literally one of the least talked about destinations on the internet.

Furthermore, before the battalions of my loyal readers, quite understandably wondering where their next serving of spiritual nourishment and indispensable retail wisdom is coming from, begin to surge lemming-like towards the nearest skyscraper or scenic cliff-top path, I can gleefully announce that there will shortly be two new Planet Retail blogs for you to ignore in your droves. These will be delivered to you with a silver-service flourish by Planet Retail’s Global research directors Robert Gregory and Natalie Berg. You can find them at http://blog.emap.com/Rob_Gregory/ and http://blog.emap.com/Natalie_Berg/ One can only hope that you can find it in your steely hearts to embrace their offerings with somewhat more fervour than the lukewarm indifference with which this blog has been met.

Anyway, on with the swansong.

Walmart net sales per second: $12,844

Ten largest confirmed vendors to Walmart (sales, $ mn)

P&G - $11,854 million

McLane - $10,298 million

Murphy Oil - $8,213 million

Kraft Foods - $6,462 million

PepsiCo                - $5,620 million

Tyson Foods - $3,685 million

General Mills - $3,085 million

Kimberly Clark - $2,485 million

Kellogg - $2,641 million

ConAgra - $2,174 million

Walmart has become the leading global retailer in less than 20 years

The first international store was a Sam’s Club that opened in Mexico City in 1991: it now has 4,112 stores and more than 680,000 associates in 14 countries

Walmart’s UK chain Asda was named after former Prime Minister Herbert ASquith and popular British decathlete DAley Thompson

My favourite Walmart stores:

1)      Neighborhood Market by Walmart, Rogers, AR

2)      Asda, Bootle

3)      Walmart supercentre, Port Elgin, ON

Walmart International is now the world’s third largest retailer in its own right

10% of Chinese exports to the USA are to Walmart

All of the discarded ‘*’ components of the old Wal*Mart store front signage have been sent to the Pacific coast to be used as replacement shells for injured leatherback turtles

The new Walmart Canada Perishable Distribution Centre, to be opened in Balzac, Alberta, next month, will be both one of the most sustainable such facilities in North America and one of Canada’s largest refrigerated buildings. Walmart forecasts that LED lighting in Balzac will deliver CAD1 million over seven years in operating cost savings

If it were a country, Walmart would be the 19th largest economy in the world behind Belgium

If all of Walmart’s stores were made out of cheese, it would have required 15 billion elephants – or an astonishing 48 billion narwhales – to provide the necessary amount of milk

The top 10 US retailers spent $8.9 billion on advertising in 2009 – of this, Walmart accounted for $2.4 billion

In 2009, it took Walmart 1.7 days to generate the same sales as Ocado did all year

My favourite Walmart photo:

Walmart has 28 global procurement offices in 25 countries, and it sources from 70 countries around the world.

While Walmart US has seen sales grow by 7.8% over the last three years, its grocery sales have grown by 17% to $132 billion

My favourite Walmart private brands:

1)      George

2)      Great Value (new version)

3)      Marketside

After the escape of a breeding pair from a private aviary in nearby Fayetteville, Bentonville is home to the world’s largest colony of ptarmigans

117 listed US vendors name Walmart as a major customer in their 10Ks - on average Walmart accounts for 20.7% of their sales. The highest percentage is 55%

Number of customers per week: Walmart - 200 million; McDonalds - 420 million

Over the last three years, many vendors have seen their sales to Walmart increase substantially. Some of the big winners include: McLane +$1 billion; PepsiCo +$883 million; Kraft +$876 million; General Mills +$597 million; ConAgra +$473 million; Kellogg +$404 million; P&G +$383 million

72% of Walmart cashiers are women; 14% of store managers are women

The George clothing range was named after Allan Leighton’s favourite railway locomotive engineer George Stephenson

Walmart spends USD100 billion a year on sourcing private label

My least favourite Walmart stores:

1)            Any Walmart location in Germany. Really, take your pick

2)            Walmart, Square One Mall, Mississauga, ON

3)            Asda, Slough

42% of Walmart’s sales are from families making less than $40K pa

Average Walmart salary: $20,774

My favourite Walmart store concepts:

1)      New versions of Neighborhood Market

2)      Asda Living

3)      Bodega Aurrera

During fiscal 2010, approximately 79% of the Walmart Stores segment’s purchases of merchandise was shipped from the retailer’s distribution centres. The Walmart

operations are supported by 120 distribution facilities as of 31 January 2010, located strategically throughout the continental United States. Of these 120 distribution facilities, Walmart owns and operates 105

76% of patrons at SmartStyle hair salons in Walmart Supercenters are women. Their average bill is $19

My favourite Walmart trailer:

 90% of all Americans live within 15 miles of a Walmart.

Walmart processes 22.5 million job applications a year, equivalent to the entire population of Australia

If all of the peanut butter sold by Walmart Mexico was used as paint, it would be enough to cover 1,450 brontosauruses

10 most Walmart-reliant vendors by % of total sales (company / sector / %):

DAC Technologies Group / Gun accessories / 55.0

Emerson Radio / Electricals / 53.0

CPI / Photographic studios / 52.0

Crown Crafts / Baby products / 47.0

Tandy Brands / Fashion accessories / 43.0

Frederick’s of Hollywood / Intimate apparel / 39.0

HBB (Nacco Industries) / Kitchenware & small appliances / 38.0

R. G. Barry / Footwear & accessories / 38.0

CCA Industries / HBC / 36.0

Del Monte Foods / Food & petcare / 35.0

Lions Gate Entertainment / Films & DVD / 35.0

A recent poll among Walmart employees has revealed the most popular acts to have performed at the annual shareholders meeting over the last 10 years:

1)      Massed Pipe Bands of Scottish Army Regiments

2)      The cast of ‘Saved by the Bell’

3)      Slipknot

Walmart purchases goods from more than 68,000 US suppliers and claims to support more than 3.5 million supplier jobs. Over USD150 billion is spent with US suppliers

The power for the Walmart Supercenter in Winnemucca, Nevada, is provided by tidal turbines located in the huge subterranean lake under the store

Another disappointing quarter for Walmart US

Walmart US net sales of USD64.7 billion were flat in the second quarter, with operating earnings down by 0.2% at USD4.879 billion. Comparable store sales figures for Walmart US improved by the end of the 13-week period, with traffic trends showing sequential improvement during the period. For the quarter as a whole, they were down by 1.8%. The Walmart US operating segment, now led by President and CEO Bill Simon, remains focused on improving sales and customer traffic. Walmart stated that its leadership team is working to ensure that the merchandise assortment is relevant for their customers, that Walmart will lead the market on price, and that they will strengthen their relationships with suppliers.

Mike Duke acknowledged that Walmart US had a challenging second quarter and said that the top priority for the business remains improving top line sales and customer traffic, adding that “I’m fully aligned with Bill’s focus on assortment and pricing, and with strengthening our supplier relationships. I’m also impressed with the urgency and the speed that he and his team are demonstrating in executing changes in strategy that are making sense for our customers and shareholders. They’re moving rapidly to build on the initiatives that worked and adjusting those that have not worked.”

Much of what Bill Simon had to say was very much an open admission that some key aspects of Project Impact would be diluted, or even reversed, with Simon noting that: “We’ve set out a clear direction for change in our business and believe this will put us on a track to see improvement by the fourth quarter.” Some of his key points included:

• In the second quarter, for the first two months of the quarter, Action Alleys were clear of merchandise and our featured many deep rollbacks on price. The deep rollbacks featured in May and June did improve price impression, but they did not generate the level of top line sales hoped for by Walmart.

• In July, Walmart put the emphasis back on its core EDLP model.

• Walmart also engaged with suppliers to review its assortment to make sure that it has the breadth of inventory that Walmart customers have come to expect. In the coming weeks and months, Walmart’s assortment will be more relevant to its customers. Walmart will be leveraging its suppliers’ capabilities to help it drive impactful features.

• Walmart is restoring thousands of products to its assortment and adding new items. Simon stated: “We plan to win in every category and let customers decide through their purchase decisions what to include in our assortment.”

• Since the start of July 2010, Walmart has returned merchandise to Action Alley. Store managers now have more autonomy to make decisions on what is right for their store’s customers.

Investments in rollbacks in the first two months of the quarter caused a decrease in operating income of 22 basis points, as Walmart’s gross margin rate was down year over year. Walmart US inventory is up 4.4% compared to last year, represented by increased inventory now placed in Action Alley and increased assortment as Walmart solidifies its focus on solid in-stock levels. Inventory is still low when compared to historical levels - well below the July 2007 and the July 2008 levels of inventory.

One component of Project Impact is still going strong – store remodels. The final group of 550 store remodels, scheduled for this year, are currently underway. One of the problems that early remodels encountered was excessive disruption for shoppers, and Simon noted that the retailer has improved its remodelling process by reducing the level of disruption for customers and associates as merchandise is moved around the store.

Simon reiterated that the strategic changes that he has implemented will improve top line sales by the fourth quarter. He concluded that: “We’re focused on the right assortment, price leadership, driving traffic and delivering an unbeatable customer experience in our stores. We recognise that it will take time to see significant changes in our comps and that the US economy remains challenging. Gas prices and unemployment continue to influence how our core customers shop.”

In a mostly deflationary food environment, grocery sales generated slightly positive comp sales. Simon noted that more aggressive rollbacks did not generate the overall sales lift the retailer hoped for, but did deliver a sequential improvement in grocery traffic during the quarter. Fresh categories continued to perform well in Q2. Fresh categories, including dairy and meat, for example, had modest inflation, that was offset by deflation in other areas. Walmart noted that it gained significant share in Q2 in the soft drinks and snack categories, both during and after its rollbacks.

Health and wellness comp sales were slightly negative, due to higher demand for generics and a shift to 90-day prescriptions. Wellness categories continued to show positive results. Recalls in over-the-counter areas impacted the business negatively.

Initial back-to-school sales indicate that customers are shopping more closely to the event. Walmart has been strongly marketing price messages for school supplies, electronics, apparel and home or dorm items. More than 1,000 stores have merchandise specific to college areas, and all stores carry merchandise with logos from local high schools. Simon stated that Walmart is very focused on delivering basics in back-to-school apparel, such as socks, underwear, tees, and school uniforms.

Overall apparel comps remained negative. The company stated that it is focused on improvement in its apparel business and believes that it will generate better comps by the fourth quarter. Walmart’s apparel team is reemphasising offerings for its core shopper and including more relevant size offerings in its core Faded Glory, Danskin Now and Just My Size brands.

In home, comps were negative. Sales of grills, lawnmowers and patio sets were soft. Indoor categories were mixed, with strength in floor care, appliances and bedding. Sales in baking and decorating were strong, reflecting the ongoing trend of customers cooking and baking at home.

Hardlines were yet another category with a negative quarterly comp, although Walmart highlighted some positivity in categories like automotive and hardware as shoppers seek to complete basic maintenance tasks themselves.

Entertainment comp sales were negative (challenged by a decline in average unit retail prices), but Walmart was consoled by the improvement it’s seeing in back-to-school related areas and some decent momentum in its wireless business.

But a solid quarter for Sam’s

Net sales for Sam’s Club, excluding fuel, increased to USD11.4 billion, an increase of 0.6% over last year’s second quarter. Sam’s Club saw operating earnings up by 2.4% at USD428 million. The chain delivered 1.0% comparable club sales without fuel, with average ticket, excluding fuel, for this 13-week period increased for both Business and Advantage members.

Brian Cornell stated that the Sam’s Club strategy remains focused on taking care of its members and staying true to the brand promise of ‘Savings Made Simple’. Sam’s is improving its shopping experience with innovation and technology, recently announcing that it is to upgrade all clubs to WiFi by the end of the year. Members will benefit by having the use of their smart phones while shopping and  associates will be able to demo new IPTVs and other networked devices on a real time basis. In addition, Sam’s announced last week that it will carry the iPhone 4 in its clubs. Cornell added that Sam’s is relying on member insights to make the most relevant merchandising choices for members – insights that might well have been absent from Walmart US when it made certain merchandise decisions over the last couple of years.

Sales in some of the largest fresh and health and wellness categories continued to be positive, including produce, meat, snacks, baby care and pharmacy. Cornell stated that Sam’s is seeing an uptick in discretionary spending via positive performance in categories such as mattresses, jewellery, domestics and housewares. Sales in apparel continue to improve, the result of adding several key brands that are “resonating with our members.” Seasonal categories such as grills, patio, seasonal décor were also successful during the quarter. Additionally, tobacco sales continue to be very positive.

International buoyed by Mexico, Brazil and China

Walmart International net sales were USD25.9 billion, an increase of 11.0% from last year’s second quarter, with strong underlying sales in Mexico, and new store growth in Brazil and China. The increase in Walmart International net sales includes an USD857 million positive impact from currency exchange rate fluctuations. On a constant currency basis, Walmart International net sales were up 7.3% to USD25.0 billion from last year’s second quarter results. Operating profits improved strongly, up by 16.8% to USD1.299 billion.

Comps down again in the UK

Walmart reported that Asda continues to make good progress towards their strategic goals. In the second quarter, Asda’s sales grew in the low single digits, while comp sales without fuel declined 40 basis points. Asda’s gross margin as a percentage of sales increased in the second quarter on a mix shift towards higher-margin George and general merchandise. George had a particularly strong quarter, with strong sales of World Cup related merchandise. Customers continue to respond well to the guarantee, and Asda continues to see this as a unique competitive advantage in the market. Expenses as a percent of sales declined slightly as the Asda “we operate for less” programme continues to deliver efficiencies. As a result, operating income grew faster than sales.

Strong showing in Mexico

Walmex’s sales for this quarter were up 9.8%, and comparable store sales were up 2.7 %, outperforming the industry. So far this year, Walmex has opened 60 new stores and restaurants. For the second quarter, all of Mexico’s formats have positive comp growth. Customer count was up 3.7% at comparable stores.

Multi-banner strategy pays off in Brazil

Since the second quarter of last year, Walmart has opened 93 new stores in Brazil. According to Doug McMillon, Brazil has the greatest number of retail banners of all of Walmart’s countries, enabling the retailer have formats that meet the local and regional needs of customers. Brazil’s second quarter sales growth was 13.3% and comparable store sales grew 3.1%, both in real terms. Customer traffic at comparable stores declined 5.2% and average ticket increased 9.1% in real terms. Sales at cash & carry, supermarket and soft discount formats continue to perform well. A change in sales mix and soft sales in fresh resulted in a 1.1 percentage point decline in gross margin as a percentage of sales. Expenses as a percentage of sales improved even after adding a significant number of new stores at the end of last year.

Comps down in Japan. Again.

In Japan, second quarter overall sales and comparable store sales both declined by approximately 0.8%, the result of continued deflation in grocery and consumables. In real terms, comparable store sales in Japan increased by 1.6%, as traffic continues to increase because customers are responding well to EDLP. Food and consumables showed strong performance, while general merchandise and apparel sales were down. Expenses as a percentage of sales are down significantly from last year due to Walmart Japan’s continued focus on execution of EDLC in support of the EDLP initiative.

Robust expansion continues in China

China continues to be a growth market for Walmart. In the second quarter, Walmart opened seven stores, for a total of 36 new stores in the last 12 months. This brings the total China store count to 291. Sales increased 15.4% over the second quarter of last year, and comparable store sales growth remained strong at 6.1 percent. Average ticket grew significantly, but traffic declined as customers continue to buy more on fewer trips. Gross margin as a percentage of sales was down slightly from the second quarter of last year thanks to ongoing investment in price. Operating income grew faster than sales, due to the continued expense savings from labour productivity programmes and energy efficiency initiatives.

Canada sees flat comps

Walmart Canada’s second quarter sales growth was 4.2%. The growth was largely due to the Supercentre expansion programme and a strong category performance in existing stores. Comparable sales in Canada were flat to last year. Traffic was down 40 basis points and ticket up 40 basis points in the second quarter as customers continue to be cautious. Sales in Western Canada have been softer than both Ontario and Quebec. Growth was led by sales of food, consumables and health and wellness - partially offset by softer sales in entertainment and hardlines. Canada’s gross margin rate increased over last year, due to better inventory management, a reduction in shrinkage and improved purchasing. Canada’s expenses grew faster than sales primarily due to our bank start-up costs and an increase in utility rates. Despite the increase in expenses, Canada’s second quarter operating income grew faster than sales.

1)     Sorry for not posting for a few weeks

2)     Sorry for banging on about my trip to Canada again

3)     Sorry for my new subtle attempts to boost the visitor numbers to this blog*

I promise that this will be my final mention of my trip to Canada, as I imagine it’s getting slightly tedious for all three regular readers, but there were a couple of foodservice highlights that I felt I should share with you before I move onto matters more Walmart-related.

*Isn’t Justin Bieber great? I love Justin Bieber. He is, like, mega awesome.

The topic of breakfast is very dear to my increasingly clogged and disease-ridden heart. It is quite clearly the most important, and often best, meal of the day and should be cherished beyond measure. It is fair to say that Canada has provided at least three of the greatest breakfasts I have ever eaten – including (on a previous trip) a marvellous effort from the instore café in Zellers in the Square One mall in Mississauga and a stratospherically awesome offering from Shopsy’s in Toronto. If you are ever in Toronto and like a good breakfast (or, indeed, any other meal) check www.shopsys.ca before you go and I can personally guarantee you a fine meal with excellent service.

On my recent trip, the best breakfast by far was in an A&W in Stratford, ON. I’ve had a few disappointing dining occasion solutions through the years at A&W in the USA (where it is operated by under the auspices of the mighty Yum! Brands empire), but the food in the independent Canadian business was top-drawer. Great coffee, bacon, eggs, hash browns and toast with a bottomless supply of Kraft peanut butter was visited upon me in a great restaurant with excellent décor and very friendly service. Great stuff.

The runner-up in the Canadian breakfast competition has been awarded to the Marriott Residence Inn in Toronto. Not only did it offer the usual hotel breakfast buffet privilege of enabling me to overindulge to the point of bulimia, it had a rotating ‘guest ingredient’ policy which made getting up each morning tremendously exciting. Like a gastronomic version of Russian roulette, but with bits of dead pig rather than bullets.

The first day, the special guest ingredient was one of my all time favourites: the type of desiccated bacon that one only finds in midscale hotels in North America. The kind of bacon that appears to have been passed through a dehumidifier then baked for up to 27 years. The kind of bacon that shatters into a million pieces when a fork goes anywhere near it. Delicious. The guest ingredient on the second morning was some kind of smoked sausages that can only be described as monumentally tasty.

All this aside, the crowning glory of the breakfast at the Marriott Residence Inn was a huge vat of molten squeezy cheese that could be accessed with a pump action device. There is nothing that cannot be improved by covering it with some luminous orange synthetic cheese substance. Majestic.

My final food service recommendation would be a chain of restaurants called Eggspectation (see what they did there?) which, naturally, enough, specialises in egg-based meals. The omelettes were works of utter genius, while the eggs Benedict I troughed were among the best I’ve ever had. There appeared to be quite a few locations across Canada and I can thoroughly recommend the place for some top quality, inexpensive meals. Check it out here: www.eggspectations.com

*Justin Bieber is like so awesome

The results of my foodservice research on behalf of you, dear reader, can be seen below.

On to things Walmart, and I’m delighted to reveal that I’m close to completing research on Planet Retail’s annual survey of Walmart vendors, which is basically me trawling through millions of SEC filings looking for those companies that reveal their sales to Walmart.

Sadly, Remington Arms has stopped reporting to the SEC, so I can no longer reveal their annual sales of guns to the retailer (which stood at $106 million in 2008), although the weapons-related theme has been taken up by DAC Technologies Group International, who produce gun cleaning kits and gun safety devices and generated a whopping 55% of their 2009 sales through Walmart (down from an eye-watering 72% in 2008).

Other new entries in the list include McCormick – the herbs & spices people – who saw 11% of sales ($351 million) come through Walmart; Jackson Hewitt Tax Service (which took over the instore tax returns gig from H&R Block and saw 17% of its tax returns business come through Walmart as a result) and Maidenform.

Maidenform is one of those companies that causes raised eyebrows when I am conducting desk research, as it would appear to the untrained eye that a middle-aged man is staring at photos of women in their underwear, but clearly nothing could be further from the truth. Maidenform styles itself as a ‘global intimate apparel company’, which it explains comprises bras, panties and shapewear (that might get visitor numbers up better than the Justin Bieber stuff). One of the core parts of its business is Sweet Nothings: a collection of bras and shapewear sold at Walmart stores, including 3,400 stores in the United States, 278 stores in Canada, 16 stores in Puerto Rico and 151 stores in Mexico. As a result, Maidenform sees 16.7% of its sales being delivered via Walmart. Maidenform also states that its Self Expressions brand is sold at 1,719 Target stores in the US and internationally at 17 Carrefour stores in Belgium, 153 Kaufland stores and 38 Globus stores in Germany and 234 Zellers stores in Canada. A very esoteric bunch of retailers if ever there was one.

The research is also throwing up the fact that a close partnership and alignment with Walmart can generate significant opportunities in terms of volumes. For example, many large FMCG vendors and wholesalers have seen huge additional volumes through Walmart over the last three years, such as McLane (+$1 billion); PepsiCo (+$883 million); Kraft ($876 million); General Mills ($597 million); ConAgra ($473 million); Kellogg ($404 million); and P&G ($383 million).

In terms of growth, the big suppliers that have seen their sales to Walmart increase by the fastest rate over the last three years include PepsiCo (+18.6%); General Mills (+24%); Kellogg (+18%); ConAgra (+28.9%); Clorox (+16.8%); Del Monte (+23.5%) and Energizer (+34%). These are left in the shade, however, by Smucker (+146%) and private label specialist Ralcorp (+121%). All of the data and findings will be published by Planet Retail in the very near future.

*Justin Bieber is like so hot

My back of an envelope guestimates suggest that Walmart is the global leader in HBC retailing and number three in pharmacy, so a brief mention of Bentonville’s finest would not go amiss here, particularly as this is supposed to be a blog about Walmart.

As in categories such as grocery and consumer electronics, HBC appears to have been one of the departments that has flourished amid the whole Project Impact and store remodelling programmes. Some areas, such as fragrance and cosmetics, have been improved beyond recognition, with the inclusion of some heavy branding by the likes of L’Oreal and Revlon lending the department a great deal of authority and no small amount of style. Yet another sign that Walmart is transitioning away from the jack of all trades approach to mass-merchandising and instead devoting expertise and resource to the categories it can do well.

HBC is one part of the store where the use of co-branded Save Money Live Better end-cap displays are used extensively, suggesting that vendors in this category are seeing a lot of benefit from participating in the co-promotion, as it presumably doesn’t come cheap. All in all, HBC – like consumer electronics and grocery – is an area where Walmart has improved its offer exponentially in North America.

Canada’s specialist health & beauty retail sector, as compared to areas like grocery, home improvement or electronics, is one that is relatively bereft of incursions from the USA. While one could have been forgiven for assuming that the likes of Walgreens, CVS or Ulta would have become active in Canada by now, the fact of the matter remains that retailers such as Walgreens still have huge potential for ongoing expansion in the US before they even have to think about looking for international opportunities.

The market leader by a mile is Shoppers Drug Mart with around 1,300 stores trading eponymously and under the Pharmaprix banner in Quebec. In the two or three years since the last chance I had to amble around an SDM store, the retailer has really raised the bar, particularly in areas like beauty products, grocery, organics and private label.

The stores I saw had really benefitted from the addition of Beauty Boutique areas: instore departments selling a convincing range of mid- to high-end cosmetics and skincare. Brands such as Lancôme, Bare Escentuals, Smashbox, Biotherm, Benefit, Guerlain, Dior and L’Occitane (I really don’t have the faintest idea what I’m talking about here, totally alien territory) were housed in a very charismatic way, with distinct branding and lighting. The department would not have looked out of place in an upscale department store such was the quality of the fixtures, flooring, lighting etc. The nearby fragrance and jewellery area was pretty darn nifty too.

The food category has got a lot better too, boosted by the arrival of the Nativa organic private label range. Nice product and nice packaging.

The real highlight from Shoppers Drug Mart was the relatively new Murale standalone beauty concept. The store I saw was located in the Don Mills retail development on the outskirts of Toronto. Everything all the way from the store front to the charming customer service at checkout was a delight. The décor was colourful without being garish and the overall store design was logical and well segmented. The range was extensive across a wide range of beauty categories and there were myriad value added services available, such as makeovers, personal shopping, a brow bar and a bridal makeover service. Only one negative sentiment: in the 30 minutes I was in there, I didn’t see a single other customer, so I don’t know if they might want to stick a bit of cash behind marketing to drive awareness.

Elsewhere, I was pretty impressed by Rexall, the chain of independent pharmacies operated under the Rexall brand by Katz Group. The store I saw was in Southampton, the namesake of my majestic hometown, and I’m delighted to report that the version in Ontario is as picturesque and beautiful as Southampton in the UK.

Rexall offered a very clean and well organised store design. The food and drink section was executed to a very high standard while the mainstream HBC range was notable for its breadth and depth, complemented by a clearly demarcated fragrance and cosmetics area with dedicated shelving and lighting. Customer service was faultless. Good work.

Perhaps less enticing was PJC, although I think I’m right in saying that I didn’t visit what Jean Coutu would regard as one of its flagship stores. Located in a fairly grubby strip mall, the store was a bit on the small side and therefore slightly cramped. It certainly sold everything that you would expect from a drugstore and had a busy pharmacy counter, but overall the experience was one not dissimilar to if Walgreens opened a store inside a phone booth. It was hard to gauge the level of customer service, as I think the shop assistant had been rendered somewhat emotionally damaged by my increasingly risible attempt to ask for ‘nail clippers’ in French. C’est la vie.

I’d like to think that last week’s rambling piffle covered off my thoughts on Walmart, but for those who missed that bleeding edge piece of incisive analysis or have a short attention span, here’s a brief reminder. Some of the new Supercentres I encountered were fantastic examples of how Walmart has become an excellent grocery retailer. Impressive merchandising, good assortment, tremendous pricing and an improving private label portfolio mean that Walmart Supercentres have evolved to become a genuinely engaging place to shop grocery and one that I would happily give my cash to, were I fortunate enough to live in Canada. Hooray for Walmart.

On to the rest. May as well start with the biggest: Loblaw. Now, there were a number of things that struck me as I shopped the various formats under the Loblaw umbrella, but the main observation concerns private label. Everywhere you looked, private label. The President’s Choice brand and its various incarnations (healthy, organic, premium, standard, household etc.) were to be found at every turn, while the fairly unsubtle (translation: migraine-inducing yellow) No Name economy range was being merchandised to great effect.

The Joe Fresh apparel range – which I have to say was incredibly well done in terms of quality, pricing and merchandising – was superlative. I would comment on the fashion credentials of the range, but I really have no right to do so. What do I know about fashion?

The other observation (which I discovered while channel surfing for Iron Chef, Deadliest Catch and the World Cup) on President’s Choice would be that it is cleverly positioned as an independent FMCG brand in its own right. The range is marketed by Loblaw with no reference to itself or any of its chain store identities. On the one hand, this obviously makes sense for a multi-banner operator, while on the other it means that PC has grown into a massively well-known and trusted brand it its own right. As Loblaw itself states in its TV spots: worth switching supermarkets for.

In terms of the stores, the Loblaws I visited was its usual self: perfectly pleasant place to shop, but with a faint hint of big box sterility despite the attempts at character with murals on the walls.

Zehrs was an altogether more charming affair (the wooden ceiling and décor helped in this regard) and the produce area was a bit more enticing than in the Loblaw outlet. The Joe Fresh apparel department was awesome too.

Provigo was a welcoming and interesting supermarket with the highlight being a well signposted and convincing display of local produce and cheeses.  

Maxi & cie was a bit of a disappointment. I get the fact that it is a price-driven proposition and therefore aesthetics are not top of the agenda, but shopping in there put me in mind of a mediocre French hypermarket in the 1990s. Piling it high and selling it cheap still has a place in this world for many consumers, but Maxi, for me at least, was a slightly cheerless and dispiriting experience.

The final Loblaw concept I saw was a significantly more uplifting affair.

As a European, when I hear the words ‘independent grocery retailer’ my heart usually sinks, as an independent supermarket is generally not an enriching moment. So it was with a slight air of trepidation that I disembarked my car outside of a Your Independent Grocer. What I discovered however - and the same would apply to IGA - is proof that independent stores, when looked after properly by a bigger grocery retailer, can provide a winning combination of a truly tailored local offer with the private label, pricing, merchandising and marketing benefits that being part of a national group can provide. Customer service was excellent, ranging and merchandising was top-drawer and the pricing was on a par with most other stores I visited. The addition of the Joe Fresh fashion range rounded out the offer nicely. Really, really good stuff.

Metro – the grocer that was enlarged through the acquisition of A&P Canada – offered a few interesting formats. Its eponymous chain was a pretty solid offer with quite a few classy touches in produce and ready meals, while its Selection and Irresistible private label ranges presented a nice array of choices in many categories. I also liked the natural & organic lines.

Super C, on the other hand, was much like Maxi & cie in that it was a big box take on discounting: efficient, good value-for-money, but a bit like a supermarket had accidently replenished a Home Depot. The one touch I liked was the differentiation between the Le Marché fresh section and the Le Depot bulk ambient department – it managed expectations very well and made the store easy to shop.

Marché Richelieu was a great little store. Operated by an independent retailer, the supermarket I visited had the misfortune of externally resembling a municipal bus garage, but once inside, the store managed to pack in an excellent fresh department, a surprisingly ample wine offer and a very creditable food-to-go offer alongside more standard supermarket fare. The lobster tank was merely an added bonus.

Onto Sobeys, possibly my favourite among the big three. I couldn’t manage to find one of their new FreshCo stores (and I noted with interest that Coronation Street is broadcast in Canada, so I reckon they just nicked the name off the supermarket in Weatherfield), but I saw quite a few of their other offerings.

Sobeys itself was as good as I remembered. Excellent service counters, great prepared foods offer and a rapidly improving private label portfolio. The value range has been markedly enhanced through the replacement of the Compliments Value/Economique range with the S!gnal economy line. The line was launched after customer feedback indicated that there was a degree of customer confusion between the existing economy and standard lines as both bore the Compliments brand. Indeed, having shopped a store that stocked both S!gnal and some residual Compliments Economique lines, I can confirm both that the Economique range was less than clear in its positioning and also that S!gnal – with its distinctive colour scheme and very strong on-shelf presence – provides much greater clarity and also a stronger value message.

As well as Compliments and S!gnal, I was particularly taken by the very stylish and well-merchandised Gourmet Minute range of chilled convenience and ready-to-eat foods. Ranging from sandwiches and salads to ready-to-heat prepared entrees, the products are freshly prepared daily instore from home-style ingredients and recipes and are displayed very effectively at the front of stores alongside other perishable and meal solution ranges.

The Sobeys concept that really impressed was IGA Extra. As with Your Independent Grocer, I approached my first IGA store with low expectations, but was blown away by the quality of the stores. All of the same PL observations as Sobeys applies to the IGA concept, but the extremely high standard of store design, lay-out, merchandising and availability meant that IGA Extra has become one of my all-time favourites. The couple of stores I saw that had a Rachelle-Berry health & wellness implant really benefited from the addition – another extra dimension to an already compelling proposition.

Other stores of note in the grocery arena included:

LCBO (the Ontario booze monopoly that offers a great selection of local and international beers, some cracking local wines – am I alone in being surprised that Canada makes nice wine? – and a marvellous array of whisky)

McEwan (a new retail/foodservice concept from celebrity chef Mark McEwan in Don Mills, ON. The store looked pretty amazing. No photos I’m afraid as I was too busy hyperventilating with excitement in the nearby Murale store, more of which next week. If you’re interested, McEwan store details can be found here: www.mcewanfoods.com)

Fresh & Wild (a fairly transparent lifting of the Fresh & Wild stores in London, UK, before they were converted to Whole Foods. No photos, as I was too busy trying to locate a Tim Hortons for a pile of meat and cheese for breakfast. Details here: www.freshandwild.ca)  

Whole Foods Market (I particularly like the store in Oakville)

Bulk Barn (quite an intriguing concept)

M&M Meat shops (is this the last specialist meat chain left on earth? They do a brilliant job with value-added products like ready-prepared kebabs and marinated cuts)

Anyway, Canada is a fine nation with (generally) fine people and some excellent retailing. Not to mention a fine line in cider and some tip-top fast food. I’ll take a look at the grocery, discount & department store and HBC sectors in general over the next couple of weeks, but being a Walmart blog, I’ll focus on that esteemed business for the time being.

I managed to visit around 10 Walmart stores over the course of my trip and found, to be honest, a bit of a mixed bag in terms of shopping experience.

Let’s start off with the positive. I saw a few Supercentres and they varied from pretty good to amazing. Obviously, all Canadian Supercenters are fairly new stores and many of them are at various stages of the Project Impact/rebranding process that most of their American cousins have already undergone. The first Canadian Supercentres were vastly superior – in my opinion – to their US counterparts at the time they first opened for business and now are they are receiving the same tender loving care in terms of décor, logo and merchandising, they are improving even more.

One Supercentre I saw – in Port Elgin, Ontario – must have been virtually brand new to the point of the paint still being wet and was indeed a thoroughly enjoyable place to shop. The exterior store design, flooring, lighting, fixtures and graphics created a stylish store that was easy to navigate with plenty of logical adjacencies. In terms of the store’s look and feel, the updated graphics and colour schemes afforded the store a warm and friendly ambiance and I was particularly taken with the fresh, entertainment and fashion departments, with different floors, graphics and colour schemes giving each department a coherence and identity in its own right.

One possible improvement to the otherwise excellent fresh grocery section could be that the prepared entrees section would really benefit from the introduction of a private brand along the lines of Walmart US’s Marketside range. Many other grocery stores that I saw (more of which next week) benefited from excellent private label ranges across a whole variety of perishable categories – perhaps Walmart Canada should follow suit?

Elsewhere in the store, it was good to see that Walmart Canada is benefitting from the improved design and more striking visual impact of the overhauled Great Value private range and the George range of clothing also appears to be performing well.

Walmart’s Canadian discount stores were extremely variable in terms of experience. Some are yet to be hit with the remodelling stick, but I’m guessing that the company is kind of figuring ‘why bother?’ if the stores in question are shortly to be relocated to new-build Supercentres or extended into the bigger format. Either way, a couple of the old school discount stores looked and felt slightly brutal in comparison to their more advanced and larger Supercentre siblings, but the couple that I saw that had been upgraded to the new branding and merchandising were perfectly pleasant in their own right.

This might be a slightly unfair criticism due to a number of factors, but by far the worst store was the discount store in the Square One mall in beautiful surroundings of Mississauga. I say unfair criticism because it is a two-floor outlet that is not necessarily in Walmart’s sweet spot in terms of layout and I also suspect that the store is a victim of its own success in that is by far the busiest Walmart unit I have ever encountered. It has changed precious little since I last visited about four years ago, save for some new internal signage and a ton of promotional clutter hawking the retailer’s new Mastercard. Partly because it was so busy, but also because it is cramped and not the most logical in terms of layout, the place was a nightmare to shop and far from convenient and aesthetically pleasing. There was product lying all over the floor in certain departments and there were some yawning gaps on the shelves. As I said, a victim of its own success, but ‘could do better’ is probably a fair summary.    

My other gripes that apply to all of the stores I visited would include disappointing levels of out of stocks in the music category. When I go shopping for CDs, I generally like to choose between a variety of CDs rather than between a variety of pieces of cardboard telling me what CDs were on sale at some point in the past. Availability was especially poor in the all important (when I’m visiting anyway) country category. Frustrating.  

The other half-hearted complaint I would have is that Sam Walton’s famous ’10 foot rule’ has seemingly been replaced by Walmart Canada with something akin to a ‘450 foot exclusion zone’. I say it’s a half-hearted complaint because I am a socially inept Englishman, and as such, I harbour a pathological fear of intrusive customer service. Also, as an analyst, I wish to be left in piece to ferret around with my camera. So, no real complaints from me. In any case, associates were more than knowledgeable and courteous when called upon and the checkout staff were unfailingly cheery and helpful – one kindly took the time to place sticky tape on the magnetic strip of my credit card to make sure it would swipe properly. Now, that’s the kind of customer service I appreciate.

All in all, Walmart Canada will be a phenomenal force when all of its Supercentres are refreshed and when all of the vintage discount stores have been remodelled, extended or relocated. Once all of the stores are of the calibre of Port Elgin, Walmart Canada will be taking no prisoners.

Asda’s President and Chief Executive Andy Clarke commented: “We very much look forward to welcoming Netto’s colleagues into our business and joining our team. Customers will benefit from low prices on a significantly broader range of quality products, complemented by the wide range of services we offer in all our smaller stores. The creation of new in store jobs in a tough economy will also be a welcome boost in scores of communities across the UK.”

Managing Director of Netto, Claus Juel-Jensen, added: “Netto has been profitable and was appointed ‘Discounter of the Year’ in 2009. As a major league player, Asda is the ideal purchaser of our UK business. We have substantial opportunities for growth in Scandinavia and Northern Europe and believe that the time has come to focus our efforts on the development of our business in these countries.”

The surprise announcement reinforces Asda’s intentions of becoming a strong multi-channel grocery retailer, despite being relatively late to the small-store game. Last month, Asda laid out its ambitious growth plans to become the market leader in general merchandise and clear number two for food. The Netto announcement, provided it gets past the Office of Fair Trading, should tick off the latter goal as it will cement Asda’s status as the UK’s second largest food retailer, leaving Sainsbury’s firmly in the number three position.

The news now explains the apparent recent lack of internal concern over Asda’s first quarter results, which saw comparable store sales decline 0.3%, the first decline for the retailer in four years. Despite the underperformance and recent uncertainty over a new Chief Executive, Asda has proven that it is back pursuing growth in no uncertain terms.

Asda will convert the Netto outlets from discount stores to supermarkets, which is consistent with the retailer’s strategy of operating grocery-led formats less than 25,000 square feet. This will damp down ongoing speculation that Asda would launch a discount or convenience format. In fact, the retailer stated last month that it plans to open 100 supermarkets within the next five years; clearly the Netto acquisition has allowed Asda to smash that goal. Last year, the retailer acquired a handful of stores from the Co-operative Group and currently trades through 22 of these smaller stores averaging 17,000 square feet. The Netto sites however will be the smallest in Asda’s estate, averaging approximately 8,000 square feet and putting it on par with the average Tesco Metro.

The smaller size means that these stores will have a limited assortment of 10,000 SKUs, which is about one-fourth the amount offered in a traditional Asda store. The smaller range means that there will likely be a strong emphasis on 1) private label to keep the stores profitable and 2) brand leaders to attract shoppers. Given that Asda has recently completed a range rationalisation process which saw 30% of SKUs disappear from some categories in existing stores, it is without a doubt that ranging will focus on only the most profitable and important brands.

The smaller size also means that fresh products will be high on the list, which of course will require more frequent replenishment. Pricing will almost certainly be identical to those found in Asda’s larger stores in order to maintain a strong value proposition. At the same time, Asda will need to push its organic and premium ranges in order to prove its credentials as a pure food retailer to new shoppers. There is still a big question mark over whether Asda can be successful without its core non-food offering. Currently, around 60% of Asda’s sales come from grocery purchases; however, many shoppers are attracted to Asda because of its ability to offer everything under one roof – including the wildly successful George apparel brand. Will those shoppers be able to see Asda as a food specialist, especially when there is plenty of existing competition with arguably stronger food offerings? Furthermore, Asda’s major play for supermarkets now means that every major grocery retailer is currently trading in this market. Brands, more specifically brands at low prices, will therefore need to play a key role in the offering in order to differentiate from the array of quality-led, private label heavy supermarkets already in existence.

Asda’s click-and-collect option – which links Asda’s burgeoning non-food e-commerce offer with its stores – will also differentiate this concept from existing supermarkets. Shoppers will be able to order from Asda’s website and have their items delivered instore for collection. Of course this will help to drive footfall in stores and ultimately reinforce cross-channel shopping among Asda customers. It also enables Asda to offer a full shop in a small-box environment, while putting additional pressure on non-food specialists such as Argos.

Despite the news coming as a shock to many analysts (including, if I’m being totally honest, me), the Asda and Netto deal makes sense for two main reasons. Firstly, Netto is already a profitable business despite relatively low buying power in the UK and merchandising style that can be charitably described as less than flawless. In fact, Netto has been the scene of some of the worst merchandising and housekeeping I’ve encountered in my career. Some of the non-food lines in particular – which can range from chainsaws to low quality guitars – have appeared on some of my visits as though they were replenished by a battalion of disoriented manatees.  

Secondly, the acquisition enables Asda to gain a foothold in the supermarket sector virtually overnight. However, there are still some major question marks about the acquisition, the most obvious of which is, will it get past the regulatory authorities? Also, the stores predominantly target lower-income groups and therefore are often located in poor locations. Given that 45% of Asda shoppers are now from ABC1 customer demographic (and growing more than 50% over the past two years), the chances of reaching Asda’s most profitable customer group are somewhat limited. Furthermore, there may be a degree of cannibalisation due to an overlap in locations, which could ultimately result in Asda selling off some of the sites.

Nonetheless, Asda’s successful operations in locations such as Bodmin, Walthamstow and Pontefract indicate that stores of this smaller size can be assimilated into Asda’s broader logistical network and trade profitably.

Despite being profitable, Netto’s revenues grew at just 0.3% last year, clearly not a good sign for a discounter in a recession. Since 2007, the chain has only added 16 new stores to the UK portfolio, despite a pre-crisis aim of 25 new stores in each of the Netto operating markets. Although posting profit in both 2007 and 2008, Netto did not find the winning formula in the UK market and announced earlier this year that they will change the range to include more non-food clearance lines, or one-offs. Obviously, the retailer did not see the impact of this new initiative and decided to exit the UK market.

Does this mean Britain is falling out of love with discount shops? Or perhaps it’s the case that there is only room in the market for Aldi, Lidl and the grocers. In fact, even the best discounters have seen sales decline quite significantly (going from 20-30% like-for-like sales growth at the start of the recession to mid-high single digits). This more restrained growth can primarily be explained by the grocers’ aggressive price-cutting tactics and the heavy emphasis on value lines from grocers ranging from Tesco to Waitrose.

With the sale of Netto in UK, Dansk Supermarked says it will now focus its growth on Scandinavia and Northern Europe. We can assume that the retailer will particularly focus on its discount banner Netto in its home market, which accounts for a quarter of its total sales worldwide and where it is the largest discount retailer. With currently some 400 Netto discount stores in Denmark, Dansk Supermarked will be able to put more emphasis on its Netto 600 expansion scheme. Netto 600 not only foresees the opening of a total of 600 stores in the long term in Dansk Supermarked’s home market, but also the extension of existing Netto stores, including the DøgnNetto city centre outlets in the greater Copenhagen area, which are still much smaller than 600 square metres.

As for Asda, it can enjoy having cemented its status as Britain’s second largest food retailer. However, there will be no resting on its laurels as its next goal will be to open 150 non-food focused Asda Living stores. Do we smell another acquisition in the future?

On the Q1 numbers, which were something of a mixed bag: some great performances from certain parts of international; a faintly underwhelming showing from the US division and a confirmation of a some disappointing trading from the usually upbeat Asda.

Total net sales for the first quarter of fiscal year 2011 were $99.1 billion, an increase of 6.0% from $93.5 billion in the first quarter last year. Net sales for the first quarter included a currency exchange rate benefit of $2.5 billion. Income from continuing operations attributable to Walmart for the quarter increased to $3.3 billion from $3.0 billion in the first quarter last year. “Walmart kicked off the fiscal year with record first quarter net sales and earnings, and I’m pleased that earnings exceeded guidance,” said Mike Duke, president and CEO. “Our teams around the world delivered on our commitment to the productivity loop. We leveraged operating expenses for the second consecutive quarter and improved the profitability of our business. Our customers, particularly in the United States, are still concerned about their personal finances and unemployment, as well as higher fuel prices,” Duke added. “Our commitment to reducing prices and managing expenses positions us well across the retail landscape.”

Shopper traffic declines in Q1 at Walmart US

Walmart US saw sales increase 1.1% to $62.3 billion, while operating profits climbed 5.6% to $6.3 billion. Walmart US comparable store sales declined 1.4% due to soft customer traffic, partially offset by an increase in average ticket, compared to the first quarter of fiscal year 2010.

Eduardo Castro-Wright, the head of Walmart US, noted that the entire comp decline this quarter was due to traffic, as average ticket was positive. He stated that there are a number of factors that he believed affected sales and traffic - the economy, deflation, competitive environment, and merchandise assortment: “Rising gas prices and high unemployment levels continue to be the most pressing issues for our core customer. Gas prices are up 41% over this time last year. Our in-depth analysis reinforced the fact that there is a strong correlation between store comps and unemployment. Stores in areas with the highest increase in unemployment are running approximately 200 basis points lower comps than those with the lowest.”

According to Mike Duke, Walmart US is making some progress on reaffirming its credentials as a price leader and also correcting mistakes that occurred as part of the retailer’s range rationalisation programme: “It is important to strengthen Walmart’s position as the everyday price leader and to separate ourselves even more from competitors. We are in the process of adding back some merchandise that has been deleted from our assortment. These changes are on a fast track, and the impact will become even more noticeable as we progress through this fiscal year.”

Castro-Wright added some colour on Walmart’s renewed vigour on pricing: “We selected 12 iconic branded products that consumers recognize. With regular pricing, the items are $44. The lowest advertised price across the market during the last 52 weeks was $34. Now at Walmart, those same items are $29, saving the Walmart customer as much as $15.”

Deflation begins to moderate in grocery

Looking at the quarter in a more granular, category-specific way, Walmart had the following observations to make.

In grocery, food deflation began to moderate during the quarter in areas like dairy, meat, and produce. Comp store sales results were solid compared to the market and Walmart claims that it maintained a double-digit price gap versus its competition across multiple categories. Snacks, beverages, produce, seafood and dairy all had comp increases, while dry grocery and consumables were soft.

Comps in health and wellness were solid. Walmart’s pharmacy business is said to remain strong. Maintenance and wellness categories, such as vitamins and adult nutrition, are generating consistently strong comps.

Entertainment comp sales were negative, as Walmart experienced mixed results by category.  The retailer continued to see strong performance in large panel TVs (particularly with new LED technology), in laptops, and in wireless. The company also noted that it benefited from a favourable DVD release schedule compared to last year. In toys, sales of bicycles and ride-on vehicles continue to do very well and exceeded plans. On the other hand, video games and gaming hardware were below expectations across all the gaming brands, due to fewer new releases and the lack of innovation in gaming systems.

In hardlines, Walmart noted that it was disappointed with the performance of its seasonal categories and stationery. Do-it-yourself automotive continued to thrive as consumers work to extend the useful life of their vehicles rather than purchase new vehicles. The stationery business, which includes books and magazines, was impacted by the anniversary of the Twilight series launch. In home, results were mixed overall, with momentum in categories like outdoor living, bedding, home management, and food preparation.

In what might be considered one of few areas of ongoing concern for Walmart, its performance in apparel remained below expectations and is described as continuing to be a “work in progress” for the clothing team. However, some of the bright spots within apparel were said to be active wear, licensed apparel and team sports. The gloomy mood for Walmart’s apparel business contrasts sharply with the more positive sentiments from arch competitor Target, who posted Q1 comp growth of 2.8% and stated that “sales of higher margin discretionary items were particularly strong, especially in apparel.”

Walmart.com had another “outstanding” quarter, delivering growth of more than 50%, which “outpaced the industry averages by a wide margin.” Traffic, orders, average order size, and conversion were all up.

Fresh continues strong showing at Sam’s

Sam’s Club posted operating earnings ahead by 4.9% at $429 million on sales 4.6% higher at $11.7 billion. Sam’s Club delivered 0.7% comparable club sales without fuel for the first quarter. The clubs had strong sales from fresh foods and health and wellness categories, as well as home and apparel. Providing some personal insight into the performance at Sam’s, Brian Cornell noted that “In addition to the sales strength in many of our fresh and health and wellness categories, we continue to see healthy margin mix and profit performance in other categories, such as apparel, home, seasonal and automotive. During my weekly club visits, I am seeing more and more of our members shopping our seasonal categories, including grills, patio and outdoor plants. We are seeing abatement in broad-based deflation, and, in fact have experienced some inflation in a few categories, like dairy and meat. On a positive note, we see strength in comp unit sales for items with price points greater than $150, such as jewellery and mattresses.”

Cornell added that, while Sam’s continued to see good market demand for home electronics, the chain’s performance was not ideal as it was not positioned optimally from an inventory standpoint due to some industry-wide shortages on flat panels, as well as due to inventory transition to newer technology like LED TVs. Cornell added that “we are now in a better position, having the latest technology from LG, Samsung and Vizio and we’re experiencing improved performance at the start of the second quarter.”

Global sourcing drive producing cost reductions

With regards to Walmart’s ongoing global sourcing initiatives, Castro-Wright reported that “We are pleased with the progress we are making and the savings goals we have set for this year are tracking well. Our Global Merchandising Centres have already started to produce reductions in our cost of goods. All of the centres are now in place and are quickly building resources and addressing business needs. As expected, we are leveraging our global footprint to reduce costs. We also expect to see improvements in product timelines as the year progresses.”

The international division saw sales increase by 21.4% to $25.0 billion, with operating profits up by 27.8% at $1.0 billion. On a constant currency basis, Walmart International net sales were up 8.9% to $22.5 billion. Mexico, Canada, Brazil and China drove the strong sales performance. Mike Duke noted that: “International continues to be our fastest-growing division, and an increasingly important contributor to our business. This performance shows the strength of our EDLC-EDLP model around the world. International leveraged operating expenses for the fifth consecutive quarter and most countries continued to improve their inventory management. As we look to the future, we’re pleased with the long-term opportunities in the emerging markets, especially as economies in those regions improve. We particularly see substantial growth ahead in Mexico, China, and Brazil, and a large part of our capital expenditure budget is committed to those markets. We continue to grow. More than 60 % of the additional square footage of retail selling space this quarter was within Walmart International. We expect to have even more store openings throughout the company in the second and third quarters.”

On the call alongside the Q1 results, international chief Doug McMillon provided a nice reminder of the three key strategic pillars for the international division:

1)       Growth by winning locally. The leaders in each market have the freedom to ensure relevance for customers and to move with speed.

2)      Leverage costs by enabling the productivity loop. The retailer aims to operate for less, buy for less, and sell for less. Walmart states that it also attempts to leverage the knowledge and expertise of its talent, by sharing and implementing best practices across the entire organisation.

3)      Balancing returns with growth by managing its portfolio, including thoughtful capital allocation between emerging and mature markets.

Asda sees first comp decline for 4 years

In the UK, Asda has announced that comp sales, without fuel, were down 0.3% in the first quarter, while total sales grew in the low single digits. Profits for the same period grew ahead of sales, beating internal targets. What is noteworthy is that neither Walmart nor Asda provided much context to the reasons why Asda was underperforming its major rivals. Recent comps from Sainsbury’s (+4.8%), Tesco (+2.7%) and Morrisons (+0.8%) suggest that, despite the progress Asda has made in areas such as its Price Guarantee, product quality and customer service, it still has some work to do to attract – and retain – shoppers from competing supermarkets.

Andy Bond, chairman of the Asda executive committee said: “As we’ve already said, by our own high standards, our first quarter sales were disappointing. The market has slowed down significantly since the turn of the year, and I expect conditions to remain tough for some time. I’m pleased to say that we’re making good progress against the plans we outlined to analysts last month. Our four pronged strategy to build sales and broaden our appeal is beginning to take shape.”

“On Price our renewed focus on EDLP means we’ve successfully reduced the number of promotions in store. The launch of the Asda Price Guarantee also means both our price position, and price perception has never been stronger. On Quality we have extended the 100 Day Guarantee to the entire George range, and have innovative plans to extend this approach to other areas of the business. Our own label food also continues to win more awards than our major rivals. On Service we’re investing heavily to reduce queues and improve the customer experience. And on Range there are some exciting developments coming in the second half of the year.”

Andy Clarke, Asda’s recently appointed CEO and President added: “Listening to customers, it’s clearer than ever that the second half of this year will be challenging for them. High petrol prices, and the prospect of tax increases from the incoming government are weighing heavily on their minds. It is our responsibility to deliver the plan we’ve laid out, and by doing so help lower the cost of living for our customers.”

In Mexico, although consumer spending continues to be cautious, McMillon noted that its discretionary formats had a solid first quarter. Walmex saw first quarter sales growth of approximately 11% and comparable store sales growth of 4.4%. Customer count was up 17.2% in total, and 5.3% at comparable stores.

Canadian Supercentre onslaught to continue

Walmart Canada’s first quarter sales growth, excluding the impact of last year’s closure of Sam’s Club, was 4.9%. The company stated that the growth rate is twice that of the market and represents a record high in market share. Unsurprisingly, a sizeable proportion of the sales growth was attributed to the expansion of the supercentre chain. 32 more supercentres were in operation than in Q1 2009, and the retailer is on track to add between 35 and 40 Supercentres this fiscal year. Q1 comps in Canada grew 1.0%, with customer traffic up 0.4% and average ticket up 0.6%. Overall sales growth was led by hardlines, health and wellness, and food and consumables, partially offset by softer sales in entertainment items. Canada’s first quarter gross margin increased 101 basis points, despite the shift in sales to lower margin items. This was the result of improved private brand sales and improved supplier negotiations.

Brazil – earlier highlighted as a market that is set to be a recipient of “thoughtful allocation of capital” – has seen 95 new store come on-stream since March 2009. Brazil’s first quarter sales growth was 16.5% and comparable store sales grew 7.6%, both in real terms. Customer traffic at comparable stores declined 2.0% and average ticket increased 9.6% in real terms. The best performances came from the cash & carry, supermarket and soft discount formats.

Japan sees sales slip at Walmart readies for expansion?

In Japan, overall, sales and comparable store sales both declined by about 1.4% in the first quarter over last year. Comparable store sales in real terms were essentially flat to last year. Price investment and deflation had a negative effect on average ticket, but EDLP is said to have continued to increase customer traffic. Food and apparel sales were down, while general merchandise was up. Expenses as a %age of sales are down significantly from last year due to the continued execution of EDLC in support of the EDLP initiative. As recently reported by Planet Retail, it seems that Walmart Japan Holdings – now the parent company of Seiyu, might be gearing up for an acquisitive push in what retains a troublesome and hyper-competitive market. Walmart Japan Holdings has revealed that it will appoint four executives from subsidiary Seiyu to its leadership team. Walmart Japan Holdings currently has just three executives, including Seiyu Chief Executive Officer Toru Noda. Four Seiyu executives handling development, finance, legal and business strategy have now been transferred to Walmart Japan Holdings, with two of them to work exclusively for the parent. Walmart Japan Holdings is believed to be preparing for the addition of group companies through such moves as mergers and acquisitions.

In China, Walmart opened five more stores in Q1, for a total of 38 new stores in the last 12 months, bringing Walmart’s total China store count to 284. Total sales increased 19.6% over the first quarter of last year – with comparable store sales growth of 10.6% driven by what the retailer describes as its price leadership. Average ticket grew significantly, but traffic declined as Chinese customers consolidated their shopping trips. McMillon has reiterated that China remains a key focus of Walmart International’s organic growth and continues to deliver impressive growth and operating income.

With regards to Walmart’s foray into the Indian market, McMillon stated that “We continue to be very excited and optimistic about the future in India. We have an important business relationship supporting the 60-plus stores owned by Bharti Retail. We also have opened two Best Price Modern Wholesale cash and carry stores in India in the last year. Our associates are also making a difference in the community – educating farmers about improved agricultural prices and giving them incentives for producing a good quality farm product.”

Mr Birchall adds that Walmart is now engaged in an unprecedented drive to develop a range of new, profitable, smaller stores that could address both issues, while delivering what Castro-Wright says will be “high productivity stores and with higher sales per square foot”. A new store planned at a former Mervyn’s department store in Torrance, CA, for instance, will be only around 75,000 square feet, less than half of the 185,000 square feet of a typical supercenter site. As a result, it can be built without facing obstruction in a complex public planning process. The design of those smaller stores has been shaped by its current Project Impact remodelling drive, which seeks to increase the sales per square foot of its existing store network through improved store logistics, more selective inventory and new layouts. But at the same time, the retailer has been experimenting with an entirely new group of small format stores, including a pilot of four 10,000 square foot Marketside grocery markets in Arizona, and two 39,000 square foot Hispanic-themed Supermercado de Walmart stores.

Mr Birchall goes on to remind us that Walmart is also testing a 20,000 square foot format, called Neighborhood Market by Walmart, in its home town of Bentonville, AR. Neil Currie, retail analyst at UBS, is quoted by Birchall as saying that Walmart could open 390 to 400 of the 20,000 square foot stores annually, with sales per square foot per week of $12.50 and annual sales per store of $13m.

Birchall concludes his article with a quote from Walmart spokesman Steve Restivo, who notes (ominously for other retailers) that: “We’ll continue to expand into new channels so customers can shop and experience Walmart when, where and how they want.”

Like Neil Currie, I have had the pleasure of visiting the store in Bentonville, and I have to say that it was absolutely brilliant.

Virtually everything about the store, all the way from the exterior, to the produce department, food-to-go offer and pharmacy, was excellent and a real improvement on the other Neighborhood Markets that I’ve been to. As I’ve mentioned often enough on this blog, the Marketside chain probably has a fairly limited potential, despite serving Walmart extremely well in acting as a laboratory to trial and develop the Marketside range of produce, deli, sandwiches and bakery products that are now being sold across the Supercenter network. I’m significantly more positive on the prospects for Supermercado: again, at the risk of repetition, I would reiterate that the concept really does have the legs to grow into a substantial business in its own right. 

Neighborhood Market has proven to be something of an enigma within the Walmart US business. With the first three stores opening for business in Arkansas in 1998, the chain has grown extremely slowly (in a Walmart context) to just 152 units at the end of the most recent fiscal year, a number that is surely below the company’s initial hopes for the chain. Since its inception, Neighborhood Market has undergone a steady evolution in terms of improvements and modification and its most recent iteration is the latest step in honing the concept – possibly before a more dramatic expansion programme?

In 2007, Walmart unveiled a new concept for the Neighborhood Market chain at two new stores in Naples, FL, and Plano, TX. The stores were similar to the first prototype opened earlier in the year in Tulsa, OK, in that they were designed with the female shopper in mind, offering a “warm ambiance,” an abundance of fresh and organic foods, a convenient fresh bakery and sushi bar and a uniquely designed health and beauty department. The stores’ health and beauty area showcased special lighting and concave fixtures “not normally seen in a grocery or small retail format store.” New fixtures were said to “accent easy-to-read signage and black and dark gray colour schemes.”

At that time, Walmart stated that it would be testing customer reaction and the success of the new design as it “focuses the brand for continued growth in the US.” Walmart noted that the brand had continued to be popular with shoppers since its introduction.

Since 2007, things went fairly quiet on the Neighborhood Market front until the middle of last year, when the company quietly opened couple of new concept Neighborhood Market outlets, trading as Neighborhood Market by Walmart. The new stores, which have so far been seen in Largo, FL, and in the Bentonville area in Arkansas, feature a striking new décor, the new Walmart logo and the ‘Save Money Live Better’ signage as well as features such as an instore café brewing Starbucks coffee. The store visited in Bentonville by Planet Retail featured much fewer SKUs than a typical Neighborhood Market as well as a Marketside-branded area featuring pizza and other prepared foods. The colour scheme throughout is typified by a new vibrant green as compared to the previous dull green colour scheme favoured by existing Neighborhood Market stores. Other features included a sandwich counter, fish counter, meat counter and pharmacy.

This week, there have been signs that Walmart might be quite pleased with some of the successful features of its Neighbourhood Market by Walmart concept – most notably in the realm of food-to-go. A Walmart Neighborhood Market in Mobile, AL, has this week celebrated its grand re-opening.

The 44,000 square foot store will, as per usual, carry a full line of groceries, including fresh produce, frozen foods, meat and dairy products and organic items.

What is interesting is that the deli has been expanded by 24 feet, and now offers hot rotisserie chicken, made-to-order sandwiches and pizza by the slice for the area’s lunch crowd. The expanded deli area offers a wide variety of meats, cheeses and freshly prepared food, and customers can pick up cakes and breads in the bakery. As the manager notes, “This store will give local residents a quick and easy shopping option for groceries in Mobile. Our customers are really going to like the convenience of our expanded deli and all the prepared foods we will offer.”

It sounds to me like Walmart is getting close to cracking the supermarket model. With the company looking to increase its penetration in urban markets, 75,000 square foot mini-Supercenters are all well and good, but 44,000 square foot Neighborhood Markets with a compelling prepared foods offer could be the concept of choice to take Walmart to the next level of growth in the US market. The company is busy in 2010 ‘finishing’ the practical components of Project Impact, so 2011 might well be the year when capex and strategy are both pointed in the direction of Neighborhood Market.   

If shoppers can purchase a basket of eight or more comparable products cheaper elsewhere, the retailer will give them the difference, plus a penny more. According to the retailer, the launch of the Asda Price Guarantee heralds the official end of the grocery price war between all the major supermarkets, covering over 13,000 branded and own brand products, as well as items on promotion.

From a shopper’s perspective, the new guarantee involves three steps:

1) Customers do their regular shop at Asda, remembering to keep the receipt;

2) After 9am the next day, shoppers go to www.asdapriceguarantee.co.uk to enter their receipt details to see how much their grocery shop would have cost at the other supermarkets;

3) If the shopper discovers that they would have paid less elsewhere, then Asda will give them a printable voucher for the difference, plus one penny that can be redeemed against their next Asda shop.

The price checker is powered by independent price checker, mysupermarket.co.uk, guaranteeing its impartiality. It will also be available to online grocery shoppers at www.asda.com.

Price comparisons with Tesco and Sainsbury’s, who have their own online grocery shopping sites, are made daily, while comparisons with Morrisons (which lacks an online presence) are enabled by instore price checks twice a week. The Morrisons prices are collected in six stores each week around Great Britain each Monday and Wednesday. Which kind of counteracts Morrisons’ argument that Asda can’t do price comparisons against it because Morrisons does not have an online presence.

Asda CEO Andy Bond said this was a watershed moment in the history of Asda Price. “From today, Asda cannot, and will not, be beaten on price. Our grocery guarantee puts an end to the phoney price wars that most shoppers are sick of. Plain and simple, our Price Guarantee is our cast iron promise that your basket of shopping will always be cheapest at Asda. And for the millions of shoppers who go elsewhere, my challenge is this - come to Asda this weekend and see for yourselves how much you’d save.”

Rick Bendel, Asda Chief Marketing Officer said: “This will change the way people are going to shop. It is the first time anywhere in the world to provide a permanent guarantee on the lowest price in the basket.” He added that Asda had been working on the initiative for more than a year and it was unrelated to its recent trading.

Asda has been able to launch the APG because the majority of items bought by shoppers in its stores are identical to those available at competitor supermarkets. Mysupermarket.co.uk will compare like-for-like branded or private label groceries, which accounts for around 70% of all grocery sales at Asda.

mysupermarket.co.uk compares prices for identical or equivalent products, so branded products are compared with each other and private label products are only compared where mySupermarket validates the products as being comparable. For example Asda Smart Price will be compared with other private label economy brands such as Sainsbury’s Basics and Tesco Value.

Around 10% of products at Asda are unique to the store and therefore are not included in the price checker. However, an additional 20% could be comparable but not without changes to strict trading standards regulations. For example, some specific products cannot be included due to small differences in packet sizes.

I went shopping at Asda on Monday 26 April, spending around £86 ($139.58) on a broad variety of 47 items. These items included delights such as Asda’s delicious enchiladas, classic British cuisine such as black pudding, a variety of fresh produce, chilled goods such as milk and cheese, ambient lines such as tinned tomatoes and olive oil, household goods such as kitchen towels and cleaner and a cheeky bottle of Asda Extra Special Pouilly-Fumé. In order to prove my credentials as a middle class ponce, I also purchased some balsamic vinegar.

Entering the store number, operator number, till number, transaction number and time and date of transaction on the price guarantee website, I was able to see that I would have – perhaps surprisingly – been better off shopping at Sainsbury’s, and worse off shopping at Tesco and Morrisons. The result is that Asda has offered me a £0.73 ($1.18) printable online voucher – equating to £0.72 ($1.16) for the Sainsbury’s price advantage and the £0.1 ($0.02) for good measure.

Shopping trip cost analysis:

Asda: £85.62

Tesco: £85.69

Sainsbury’s: £84.90

Morrisons: £86.28

Looking at the Asda vs. Sainsbury’s analysis in more detail, it transpires that only 10 of the 47 items purchased were comparable or available in both stores – perhaps a reflection of the fact that my basket purchased at Asda was quite heavy on private label products, a result of my skinflint value-savvy approach to shopping. Of the 10 SKUs that were comparable, Sainsbury’s was cheaper for Twinings chamomile teabags, Robinsons orange cordial, spring onions and the bottle of wine (which I nailed last night, and it was lovely).

When contrasted against Tesco, 16 of the 47 SKUs were comparable, with Asda coming out on top by a penny here and there on a few lines, but coming in significantly cheaper on Hovis bread, a few produce items and kitchen towels. For Morrisons, where 13 items qualified for comparison, the difference was again attributable to a penny saving seen across a number of items, with the biggest Asda savings being seen on private label mayonnaise, Caesar salad and the kitchen towels again.

For regular Asda shoppers who have the time and inclination to regularly input their receipt details, the new initiative will provide either the reassurance that they will be getting the best value for money from shopping at Asda, or a voucher to compensate for the fact that they could have shopped for less elsewhere. The process is reasonably painless (although we initially experienced difficulty in accessing the printable voucher) and will obviously reinforce Asda’s EDLP reputation among core Asda shoppers.

In terms of seducing shoppers away from rival supermarkets, the net impact of the online price comparison is less certain. Some shoppers will be tempted to defect to Asda, but it is worth remembering that Asda’s lacks the ubiquity of some competitors in certain parts of the UK. Asda’s online presence will no doubt compensate for the lack of a physical presence in some geographies and it is therefore very useful that the Price Guarantee also applies to online shopping. Asda has estimated that 10 million of its 18 million weekly shoppers have internet access and can take part in The Asda Price Guarantee, so there is reasonably strong potential in terms of uptake.

Despite initial and inevitable mudslinging from rivals, a with Tesco insider already telling The Telegraph “this is clearly Asda trying to divert attention from its own diabolical trading”, what is clear is that, regardless of the actual participation of existing or new Asda shoppers in the APG system, the new initiative will have an extremely powerful effect in terms of general marketing and messaging. By being able to say that it has fired the ‘final shot’ in the price war and use phrases such as ‘shopping will always be cheaper at Asda’, the chain might well gain the upper hand in terms of messaging and perception. Whether or not that will be enough to overcome issues such as ingrained shopper habits, snobbery or consumers’ unwillingness to literally and/or metaphorically go the extra mile to shop an Asda store is by no means guaranteed, but this might well be a knockout blow as far as perceptions of value for money are concerned.