Walmart Announces Launch of Price First in Q3

Christopher Durham Aug 14, 2014 5

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

Vice President of Retail Brands at Theory House

Christopher Durham is the founder of My Private Brand and the VP of retail brands at Theory House, the branding and retail marketing agency. He is the author of “Fifty2: The My Private Brand Project,” a consultant, strategist and retailer who has worked with the world’s largest retailers to build, manage and grow compelling billion dollar brands.

5 Comments »

  1. Doug Stuckey Aug 20, 2014 at 9:24 am - Reply

    The design is very reminiscent of the early days of private label, and a mistake in my opinion. Also, as a consumer insight, I doubt anyone wants “price first”…over reasonable quality. Consumers want value…and for different segments that is defined differently. I would never bring a lousy product home, and defend its purchase by saying, “well, it was really cheap”.

  2. David Buivid Aug 20, 2014 at 11:50 am - Reply

    Absolutely uninspired, insipid design. Hard to believe that after both GAP and Tropicana’s recent “minimalist” design approaches bombed, our country’s largest retailer drops this load…

  3. Scott Caras Sep 5, 2014 at 11:49 am - Reply

    I look at this through a different lens. Clearly these commodity products opened up an opportunity to have smart pricing on thes basics items. I do not believe the design was a misstep as commented. It cleary communicates in an istant what it represents…solid quality at a great no fuss price.

    They are making a clear choice to keep production cost down to the minimal and not have high design and pull through cost to manage all the variables that a packaging program sometimes runs into.

    I applaud the simplicity and clarity they are bringing to this line…not overselling it. For those shoppers looking for the ultimate value on certain items Price First (which says it all) is a smart start for ones basics.

  4. Harry Falber Jan 5, 2015 at 12:43 pm - Reply

    A private brand is perhaps a company’s greatest asset. It’s what the consumer sees as a company’s visualization of its standards of quality – no matter whether in food, drug, clothing or any private brand category.

    There is absolutely no support for this new position, as even the most price conscious of Walmart shoppers cares what goes into the product or is behind the label – especially if they feed it to their children and those important to them.

    What is so strange, is Walmart knows better and its private brand team has access to so many research organizations directly and via supplier|partners, that there must have been options to position a lowest tier value priced food product line without sacrificing a quality first message.

    What’s more, they’ve opened themselves up and perhaps opened their customers up to derision by having it shouted out in the market basket, on the home shelf, and on the table, that all that matters is the price – not the quality.

    What does that say to self-esteem of the consumer who needs value-priced foods? What does that say about the buyers and team members at Walmart? Do they care about the emotional well being of their customers?

    Bentonville is filled with very bright people. Perhaps some in marketing should have taken a stand, even at the risk of job loss, and said; “let’s put the Walton family name’s image and original standards first along with our commitment to absolute lowest price, and absolute quality standards and find an equally strong graphic packaging message that delivers on value and quality.

    A “down arrow” is not a Sam Walton message that any member of the Walmart team should be proud of as it allows little pride for the Mom or Dad who’s making the purchase. It just hurts me to look at it.

  5. V Thomas Jan 7, 2015 at 10:58 am - Reply

    The biggest problem I see with the new labels is that it does not show the product. It is a issue for all those customers who can’t read or can’t read English. How do they know what they are purchasing?

    I learned this lesson years ago when I worked in a grocery store. I had a customer return a can of lard because they thought it had a chicken in the can. Why – because they could not read and it had a chicken on the label.

    This goes back to understanding your customer.

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