Sales fall as lower prices hit Wal-Mart

WAL-MART’S underlying US sales fell unexpectedly in the second quarter as it grappled with continued pressure on consumer spending and falling food prices.

However, the world’s biggest retailer was helped by a strong performance in its international operations, particularly Asda, the UK supermarket chain.

Wal-Mart’s US like-for-like sales declined 1.2 per cent in the 13 weeks to July 31st. There was no repeat of last year’s boost from the US economic stimulus programme, and food price inflation either slowed or food prices fell.

Mike Duke, chief executive, said Wal-Mart had experienced “a sales environment more difficult than we expected”. He added: “There’s a ‘new normal’ now where people are saving more, consuming less and being more frugal.”

Chief financial officer Tom Schoewe said: “Not only did we underestimate the impact of the stimulus cheques of last year, but food deflation . . . is far greater now. We were in an inflationary period last year.”

For the 13 weeks to October 30th, Wal-Mart predicted US like- for-like sales to be flat to 2 per cent higher. In contrast, the international arm was lifted by strong growth, although the strength of the dollar reduced the value of international sales.

Wal-Mart’s international sales, at constant exchange rates, rose 11.5 per cent to $28.2 billion in the second quarter, driven by Asda, which enjoyed like-for-like sales growth of 7.2 per cent. At constant exchange rates, international operating income rose 13.3 per cent to $1.38 billion in the second quarter.

Wal-Mart’s overall net sales in the three months ended July 31st fell 1.4 per cent to $100.1 billion on adverse currency movements.

The retailer said that excluding these, net sales increased by 2.7 per cent to $104.3 billion. However, efficiency gains kept net income stable at $3.44 billion.Earnings per share rose from 87 cents to 88 cents.

Judith McKenna, finance director at Asda, the UK’s second-biggest grocer after Tesco, said the supermarket continued to win customers. She also noted a slowdown in food price inflation in the past three months and said British consumers remained cautious.