Walmart has reported a strong set of results for the first quarter, helped by a tight focus on availability, inventory and supply chain cost management.
Sales increases across the business
Across the business, total net sales increasing by 8.6% to US$112.3bn in the 12 weeks to 31 March.
In the US sales increased by 5.9%, while in the UK Asda saw sales increase by 7.1%. Across the international business sales increased by 15.0%. Operating income respectively increased by 8.1% in the US and 21.2% worldwide as the retailer continued to focus on driving operational efficiencies to reduce costs.
Inventory management and on-shelf availability central to productivity improvements
In the US, Walmart continued to focus on innovation and productivity initiatives through strategic investments in people and processes. Key areas of focus for the retailer are workforce management, inventory management, on-shelf availability, and emerging innovation. Over the quarter, Walmart's replenishment and logistics teams focused on ensuring an efficient flow of merchandise to reduce the number of times a product is handled. The retailer also redesigned modulars to maximise space and holding capacity.
Increase in inventory reflects range addition initiative
Walmart's US inventory grew by 4.2% in the first quarter versus 2011. As the company continues to refine its ranges, especially in food and consumables, it will continue to make strategic investments in areas that drive sales growth and adopt a balanced inventory approach.
Versus the first quarter of 2011, Walmart's logistics team oversaw a reduction in costs per case shipped of 5.4%, excluding rises in fuel costs. Going forward, the company will continue to focus on improving warehouse productivity and driving efficiencies through its transportation fleet.
Inventory improving internationally as focus shifts to operational execution
Internationally, Walmart is focusing on improving on-shelf availability and increasing inventory turnover. Inventory levels indicated signs of improvement in the quarter, with overall days on hand declining slightly from last year. The retailer's constant currency inventory grew 12.6% over last year, an improvement since the fourth quarter of last year, and it continues to work on the underlying processes required to deliver sustainable, solid inventory management in every market.
IIn Brazil and China in particular, Walmart is going to have a stronger focus on improving operational execution within its existing store base, rather than continuing to push ahead with aggressive store opening plans. Internationally, the goal is to transition every market to an everyday low price position, with the implementation of the everyday low cost operating model being an essential first step.
Multi-channel increasingly significant in UK
Asda is becoming an increasingly significant player in the UK online grocery market, with Q1 sales growth of 19.2%. To take the business forward, Asda is keen to develop a multi-platform approach across stores and online, with mobile increasingly positioned at the heart of the strategy. Asda will seek to build on recent m-commerce and e-commerce progress in the next quarter.
Doug McMillon, CEO of Walmart International, attributed the strong comparable sales to core growth in grocery and children's apparel, adding that UK gross profit was "relatively flat" on a year earlier.
Commenting on the UK's results Andy Clarke, CEO and president of Asda said "I'm proud of the work our stores, depots and teams at Asda House and George House put in during the quarter, to build on our end-of-year momentum and deliver market-leading growth. Customers really valued our price leadership, the ongoing improvements in quality and our commitment to warm and friendly service".