Wal-Mart had a big investor meeting today out in Bentonville.Here are the three big ideas they got across, courtesy of Deutsche Bank:
favourable Tone on Sales
We sense that sales trends have continued to be encouraging following a decent end to 2Q – similar to most of retail. As we previewed, we’d be surprised/disappointed if Wal-Mart didn’t call out positive QTD trends (say up 1%) during the meeting tomorrow (and note that the CEO Bill Simon will present first Wednesday compared to third last year). We attribute the YOY improvement to two factors: inflation and the company’s SKU add-back program. On the former, WMT has continued to experience a sequential & YOY uptick in food inflation (~60% of mix) over the past few quarters which has been partially offset by trade-down to opening price points and smaller sizes (e.g. half gallon of milk). 8,000-10,000 items have been placed back on the shelves.
Small Store Rollout Modest
We viewed the company’s neighbourhood Market (~40K) and Express (~15K) stores. Importantly, we did not get the sense that WMT will unveil a substantial rollout of either format. As already announced, the Market format, which has a greater focus on fresh grocery, is set to roll out ~180 stores over the next two years. Moreover, there are only 5 Express stores today with 5 more planned before YE. The company continues to test merchandise assortment as well as the impact of adding pharmacy and a gas station.
Innovation from Enhancing Productivity
WMT continues to look for productivity gains and efficiencies that can be reinvested. Two efficiencies highlighted during the tour were (1) EPC rollout and (2) the My Guide system. Today, EPC tags and scanners can be found on men’s denim and basics across 3,500 U.S. stores, which is improving in-stocks and freeing associates’ time. My Guide is a task management system that provides store associates with their schedule and duties for the day with the swipe of their ID badge. The process was rolled out for the overnight employees 6 months ago.
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