Walmart Announces Launch of Price First in Q3

Walmart Price FIrst front

Today, August 14, 2014 Bentonville retail giant Walmart held its Second Quarter Fiscal Year 2015 Earnings Call. The call was led by a largely new cast of Walmart executives:

  • Doug McMillon, president and CEO of Wal-Mart Stores, Inc., covered key results and provided an overall assessment of our business.
  • Claire Babineaux-Fontenot, EVP and treasurer, covered the financial details for the quarter.
  • Greg Foran, who took over this week as president and CEO of Walmart U.S., kicked things off.
  • Dave Cheesewright, president and CEO of Walmart International, was traveling and called in for the call.
  • Roz Brewer, president and CEO of Sam’s Club.
  • Neil Ashe, president and CEO of Global eCommerce, provided an update on progress made on e-commerce businesses around the world.
  • Charles Holley, Walmart’s CFO, wrapped up with a focus on Walmart guidance for the full year and the third quarter.

The group presented a long list of largely lackluster results, highlights included:

  • Walmart reported second quarter diluted earnings per share from continuing operations (EPS) of $1.21, compared to last year’s $1.23.
  • Consolidated net sales increased more than $3.2 billion, or 2.8%, to $119.3 billion.
  • Walmart U.S. comp sales were flat for the 13-week period ended Aug. 1, 2014. Comp sales for the Neighborhood Market format rose approximately 5.6%. Walmart U.S. net sales increased $1.9 billion, or 2.7%, to more than $70 billion.
  • Walmart International grew net sales 3.1% to $33.9 billion. On a constant currency basis, net sales would have increased 5.3%. Currency exchange rate fluctuations negatively impacted net sales by approximately $700 million.
  • Sam’s Club comp sales, without fuel, were flat for the 13-week period ended Aug. 1, 2014. Sam’s Club delivered 11.9% membership income growth for the quarter.
  • E-commerce sales globally increased approximately 24% on a constant currency basis, with double-digit growth in the U.S., U.K., China and Brazil.

Walmart - Price First - macaroni & CheeseThen in the midst of flat to dismal grocery results HoweverGreg Foran, president and CEO of Walmart U.S., announced the most interesting revelation of the call, the official launch of the neo-generic private label “Price First”. Regular readers will remember that we broke the story “Walmart Tests Neo-Generic\Basic Private Brand: Price First”, November 3, 2013 in a nationwide exclusive.

“In grocery, overall inflation accelerated around 60 basis points from Q1 to approximately 1.8% in Q2. Food delivered a relatively flat comp, driven by price investments in targeted categories and regions, solid performance during key seasonal events, and inflation, which was particularly strong in deli, dairy, produce, meat and seafood. However, we continued to face SNAP-related headwinds of approximately 1.6% to food, which we will cycle in November. Looking ahead, we’re continuing to adapt to changing customer needs and will launch our opening price point private label, Price First, nationwide in late Q3. With regards to the consumables business, modest deflation and industry softness led to a low single-digit negative sales comp.”

My commentary at the time, “While I applaud Walmart finally acknowledging the numerous unbranded and control label SKUs in grocery as private label products and creating a brand to tie them together – the 1970’s flashback design is at best disappointing, but at its worst it could set the industry back twenty years.” Stands true 10 months later.

Walmart - Price First - mayonaise

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Christopher Durham is the president of My Private Brand and the co-founder of The Vertex Awards. He is a strategist, author, consultant and retailer who built brands at Delhaize-owned Food Lion, and lead strategy and brand development for Lowe’s Home Improvement. He has consulted with retailers around the world on their private brand portfolios including: Family Dollar, Petco, Staples, Office Depot, Best Buy, Metro (Canada), TLW (Taiwan) and Hola (Taiwan). Durham has published five definitive books on private brands, including his first book, Fifty2: The My Private Brand Project. In 2017, he will debut his newest book, Vanguard: Vintage Originals, a visual tour of innovation and disruption in private brand going back to the mid-1800’s. Dynamic in his presentation while down to earth and frank in his opinions, he has presented at numerous conferences, including FUSE, The Dieline Conference, Packaging that Sells, Omnishopper and PLMA’a annual trade show in Chicago. Durham lives in Charlotte, NC with his wife, Laraine, and two daughters, Olivia and Sarah.