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- RESEARCH & AWARDS
Planet Retail's Global Research Director Natalie Berg said in a preview of Walmart's second-quarter earnings release Thursday that the world's largest retailer was expected to continue to show growth in sales and earnings.
"We're expecting another solid quarter with futher signs of a domestic recovery bolstered by strong growth from overseas," Berg said of the Bentonville, Ark.-based retailer. "Despite setbacks in Mexico and South Africa, Walmart International remains the company's growth engine and we are anticipating strong numbers coming from the UK and Latin America in particular."
Planet Retail forecast same-store sales growth of about 3 percent in the first quarter of 2012, which would be the fifth consecutive quarter of increasing same-store sales, and the fourth consecutive quarter of growth.
"A continuation of the positive comp trend in the U.S. is also to be expected, which would mark four consecutive quarters of comparable sales growth and indicate longevity in Walmart's domestic strategy," Berg said. "That said, we remain doubtful over the longevity of Walmart's back-to-basics approach."
Berg said the closure of the company's Walmart Express store in Chatham, Ill., showed potential weakness in the company's strategy, saying the move highlights the challenge of running small-box profitability, because the co-location with Superstores is "unsustainable."
She said the problem created a Catch-22 for Walmart where co-locating Walmart Express with Supercenters was necessary to achieve cost efficiences, but the larger format store drove traffic away from the small box.
"The recent closure of an Express store indicates that the format, despite being profitable, is a long way from perfection," she said. "Walmart needs to accelerate its multi-channel initiatives in order to sustain the current positive momentum."
Other points of interest in the preview included a positive return for the retailer on its Pay With Cash online program. The analysis showed the online Pay With Cash order was 50 percent larger than average, and that the company expects Walmart to consider the UK, Brazil, China, and South Africa as potential new markets to roll out the initiative.
Still, it said a pay-on-delivery scheme might be more appropriate for continued growth, particularly in emerging markets.
Finally, the preview discussed Walmart's push in Canada, where it opened 47 staff hiring centers and has 73 new stores, remodels or relocation projects scheduled in anticipation of Target's move into the country in 2013-14.
"Walmart has rightly gone on the offensive in Canada," the report says. "Walmart cannot compete with the strong equity and novelty of the Target brand, and will have no choice but to: become more stringent on price and ramp up store expansion plans."