Walmart Canada gaining market share
Strategy to draw in customers by lowering prices pays off in second quarter
TORONTO — Walmart Canada continued to make new sales and market share gains in the second quarter as it lowered prices to draw in consumers.
The mass merchant reported strong Canadian results in the period ended July 28, with a net sales increase of 3.4 per cent and same-store sales growth of 2.5 per cent, making it one of the Arkansasbased parent company’s strongest performing divisions. Customer traffic rose 1.4 per cent and transaction size grew 1.1 per cent.
“We further improved our price position against competitors, which contributed to market share gains in key traffic driving categories such as food and consumables,” Brett Biggs, the company’s chief financial officer, said during a morning investor conference call Thursday. “Inventory was also a focus, as the team reduced overall levels even as sales increased.”
Walmart Canada’s same-store sales growth outperformed the U.S., U.K. and China, where samestore sales grew 1.8 per cent, 1.8 per cent and 0.6 per cent, respectively. Walmart’s stores in Mexico saw the strongest performance, with same-store volume growing 7.2 per cent in the quarter.
“Walmart Canada results benefited from the fact that its quarter included July, when the weather in Ontario and Quebec improved,” said analyst Keith Howlett of Desjardins Securities in a note to clients on Thursday.
In the quarter ended July 1, same-store sales at Metro fell 0.2 per cent and Loblaw, the country’s biggest grocer, same-store sales rose 1.2 per cent in the period ended June 17.
“Nonetheless, Walmart Canada now appears to be gaining market share in food and consumables based on increasing sales per square foot rather than by the addition of square footage allocated to those categories.”
According to Nielsen data for the period, Walmart continued to make market share gains in food and consumables, with an increase of 60 basis points.
Traditional grocery retailers are grappling with stiff price competition in a low-margin, deflationary food environment and are trying to blunt the effect of Amazon’s entry into selling food by increasing their own e-commerce capabilities.
With price competition increasing despite food price deflation, grocery retailers have been unable to pass through recent price increases in meat and poultry on to consumers.
Walmart is in the process of converting its Canadian discount stores into supercentres, which carry fresh food. Of the retailer’s 410 Canadian stores, 330 are now supercentres carrying a full grocery selection. Its grocery business now accounts for roughly half of its roughly $25.5 billion in annual sales in Canada, according to industry analysts, which puts its food business in line with that of Quebecbased Metro, the country’s thirdlargest grocery chain with sales of $12.8 billion last year.
In addition, Walmart Canada has been getting more aggressive about its online grocery business, expanding its click-and-collect grocery service and eliminating the pick-up fee on orders. It has also started delivering online orders to people’s homes in selected markets.
Parent company Wal-Mart Stores Inc. Wal-Mart Stores Inc. earned $2.9-billion US, or 96 cents US per share, for the quarter, compared with earnings of $3.77-billion US, or $1.21 US per share, a year ago. Earnings excluding special items were $1.08 US per share, beating analysts’ average estimate of $1.07 US, according to Thomson Reuters.
Despite better than anticipated results, the company’s shares fell as much as three per cent in morning trading Thursday due to lower margins brought on by price cuts and higher operating expenses as the company ramped up e-commerce spending to compete with Amazon.