Both Wal-Mart Stores and Target reported lower-than-expected quarterly sales, primarily due to food deflation – including seafood prices.
"Food deflation continues to be challenging," Wal-Mart Chief Financial Officer Brett Biggs told Reuters. Food costs on products like eggs have declined dramatically in the most recent quarter, he explained.
Wal-Mart’s total revenue rose only slightly by 0.7 percent to USD 118.2 billion (EUR 111.3 billion), while United States comparable store sales rose 1.2 percent and Neighborhood Market comparable store sales rose 5.2 percent.
Wal-Mart’s Sam’s Club stores were also negative impacted by food deflation. Excluding fuel, net sales and comparable store sales increased 1.8 percent and 1.4 percent, respectively.
“Market deflation, primarily in food, negatively impacted comp sales by approximately 110 basis points versus last year,” said Doug McMillon, president and CEO of Wal-Mart, on the earnings conference call.
However, in good news for both frozen and fresh seafood vendors, Wal-Mart’s online grocery business is increasing.
“In the U.S. e-commerce business, we continue to make solid progress expanding the marketplace. We’re thrilled to have the Jet team on board, and we’re moving quickly to accelerate growth,” said Brett Biggs, executive vice president and CFO of Wal-Mart on the call. “In addition, we’re pleased with the progress we’re making with online grocery. Customer count and basket size continue to outperform our expectations and we’ve expanded this service to more than 100 U.S. markets.”
Meanwhile, Target’s third-quarter sales dropped 6.7 percent to USD 16.4 billion (EUR 15.5 billion), reflecting a 0.2 percent decline in comparable sales combined with the removal of pharmacy and clinic sales from this year’s results.
However, Target’s adjusted earnings per share of USD 1.04 (EUR 0.98) was much better than analysts expected.
Food sales continued to slide as a result of intense competition and food deflation, CEO Brian Cornell said on the conference call discussing the results. He said that Target needs to better communicate to shoppers the assortment and quality improvements the retailer has made in grocery.
Target also wants to focus more on convenient food offerings in the future.
“We've got to continue to make sure we build a greater connection with our guest as it pertains to the convenient food offering we provide,” Cornell said.
