Wal-Mart on a roll after raising its full-year earnings forecasts

Wal-Mart on a roll after raising its full-year earnings forecasts

With Christmas just 39 days away, retail giant Wal-Mart today (16 November) said it remains confident it will post positive same-store sales in the key holiday season - including better apparel revenues - despite continuing sluggish demand in its US home market.

"We are in a position of strength for the busiest and most critical season of the year, and we're expecting a positive comp in the fourth quarter," US president and CEO Bill Simon said in an earnings call.

His optimism comes after the world's largest retailer raised its full year earnings guidance after booking a 9% rise in third quarter profit to $3.4bn.

But while net sales rose 2.6% to $101.2bn, the company's US performance continues to stumble, with Walmart's domestic sales falling 0.1% to $62.2bn. Like-for-like sales in its US division fared even worse, falling 0.7%.

Without giving figures, Simon said softlines comps, which include apparel and footwear, were also negative in the quarter.

"In apparel, warmer weather put pressure on our cold weather business, particularly in ladies', men's and children's."

But he believes progress is being made in turning around the retail giant's apparel business, after outlining plans in August to re-emphasise offerings for core shoppers, including more relevant size offerings in brands like Faded Glory, Danskin Now and Just My Size.

The move also involved going back to basics, by focusing on products like socks, underwear, jeans and T-shirts that meet everyday needs for customers that include the poorest American consumers, who continue to be battered by ongoing economic pressures.

"As we cycle through the inventory based on our previous apparel strategy, we're seeing improving sales trends," Simon said today. "Our focus on the core customer has started to show areas of encouragement, as sales of socks and underwear, ladies' plus sizes and active wear outperformed the rest of apparel.

"We are very pleased with the expansion of our plus size offerings across all of ladies. In fact, comp sales of plus size active wear increased double digit for the quarter."

Simon expects that like back-to-school and Halloween, a lot of the spending will come close to Christmas, and the retailer is "well prepared" to take care of its customer over the holiday season.

As part of those preparations, the chain has increased its inventory levels, up 6.5% on the same time last year, which Simon said was "driven primarily by the planned seasonal build-up in the distribution centres." However, he added that inventory is still below the levels from two years ago.

Support for the Walmart US business comes from Mike Duke, president and CEO of Wal-Mart Stores Inc, who said it "is on the right track."

"The US team is taking the right steps to position our stores for the fourth quarter and for next year," he said.