I found various notable items in Walmart’s Q2 conference call transcript (pdf) dated August 16, 2011. I view Walmart’s results and comments as particularly noteworthy given their retail prominence and focus on low prices. I have previously commented on their quarterly results; these previous posts are found under the “paycheck to paycheck” tag.
Here are various excerpts that I find most notable:
comments from Mike Duke, from page 7:
I’ve recently observed several consumer focus groups, and it’s clear that many consumers are still struggling. They’re trading down to stretch their budgets, buying a lower priced brand of detergent, moving from branded canned goods to private label and purchasing half gallons of milk instead of gallons. That’s why we are laser-focused on investing in price to help our customers. There certainly are many reports on Walmart pricing, and the fact is that the gap has narrowed in some cases. We’re committed to widening the gap on price, and we have a specific plan and timetable to deliver EDLP to every customer.
comments from Bill Simon, p. 15:
The economy remains challenging for our core customers.
Customers are still consolidating trips due to higher year-over-year gas prices. The swings in sales due to paycheck cycles remain pronounced, and our stores must staff and stock for the volatility, both up and down. We also have seen an increase in the number of customers relying on
government assistance for food and necessities for their family.
comments from Bill Simon, p. 15:
While we saw an increase in grocery inflation of approximately 3.5 percent during the quarter, customers remain under continued pressure and are trading down to lower price points and smaller pack sizes, as well as opting out of discretionary purchases. As a result, we’re seeing minimal pass-through of inflation to sales.
Food inflation has replaced gasoline price as the most important household expense concern. In addition, more than 15 percent of Walmart moms in our monthly survey have experienced the loss of a household wage earner’s job in the last year. Almost 40 percent of these Walmart moms indicated they’re holding off or eliminating items they would normally buy, reinforcing the need for us to drive every day low price. Moms of all income levels showed a drop in confidence over last the year, with middle income moms showing the greatest drop.
comments from Bill Simon, p. 19:
We still remain concerned about the increased economic pressure on our customers and the uncertain impact it will have on their shopping behavior. With the ongoing economic volatility, it’s as important as ever to deliver on our one-stop shopping promise – a broad assortment of merchandise backed with every day low price.
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 1193.88 as this post is written