Competitors cut into Walmart Canada
Walmart Canada’s share of the grocery market grew in the second quarter, but at a significantly slowed rate, as key players, including Loblaw and Sobeys, fought back with their own price cuts.
Net sales rose 2.9 per cent at Walmart Canada in the period ended July 29, parent company Wal-Mart Stores Inc. reported Thursday, while sales at stores open for more than a year were flat, rising 1.1 per cent. That is a significant decrease from the 6.7 per cent same-store sales gain that the Canadian subsidiary reported in the first quarter, ending in April.
Brett Biggs, the company’s chief financial officer, said during the company’s recorded quarterly analyst call Thursday that the company’s “aggressive” cost reduction programs in Canada are paying off despite increased promotional activity from Canadian competitors, resulting in the ninth-consecutive quarter of same-store sales gains in this country.
“We continued to gain market share in food and consumables and health and wellness,” Briggs added, citing Nielsen data that revealed Walmart Canada gained 60 basis points of market share in the food and wellness segments in the 12week period ending July 23. Gross profit rate and operating income also increased.
But Walmart, which has more than 400 big-box stores across the country and continues to disrupt traditional grocery retailing by adding more food to its assortment, also clearly absorbed an impact from Canadian grocers’ own price-reduction moves.
Walmart Canada’s grocery market share gain in the quarter “pri- marily reflects increased square footage, in our view,” said analyst Keith Howlett of Desjardins Securities, noting the retailer continues to keep its own costs down to help offer lower prices to customers.
“In our view, Walmart Canada’s deceleration in same-store sales growth in the second quarter reflects the market strength of the leading grocery players in Canada when pricing and promotions are sharpened,” the analyst said in a note to clients Thursday, adding price cuts and promotions by the grocers had an “immediate impact in slowing the shift in traffic” to Walmart Canada. “This is positive and reduces — at least temporarily — our concerns about the disruptive impact of new pricing strategies at Sobeys and Walmart.”