Strategic Preview: Q4
November 2013 - January 2014
17 February 2014
planetretail.net
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STEPHEN SPRINGHAM
Senior Retail Analyst
1. Expectations for the Quarter
The unscheduled trading update in at the end of January confirmed that
comp growth was negative in Q4 at both Walmart US and Sam’s Club.
Walmart US: Like-for-Like Sales by Quarter, 2010-2013 (%)
3.5
3.0
Comparable Store Sales (%)
2.5
2.0
1.5
1.0
0.5
0.0
Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013f
-0.5
-1.0
-1.5
Note: Includes Sam’s Club, excludes fuel; f – forecast.
Source: Planet Retail.
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Actual Like-for-Like Sales
Projected Like-for-Like Sales
2. US: Q4 Strategic Changes
All change at the top…
 Doug McMillon has stepped up to replace Mike Duke
as Group President & CEO from 1 February 2014.
 A ‘Walmart lifer’, McMillon steps up from being CEO of Walmart
International – possible recognition the business has been too
US-centric in its outlook in the past. More significant is the fact he
has senior management experience across all three of Walmart’s
key operating units (he was previously CEO of Sam’s Club, before
assuming the same role at International).
Continuity, or just more
of the same? McMillon's
succession is logical, but
there is also a school of
thought that Walmart
could also benefit from
the ‘fresh blood’ and new
ideas an external
appointment could bring.
© Walmart
 This is a natural succession, as opposed to a forced change.
Duke’s departure was widely anticipated for some time and, at
the age of 63 and having been in the role since 2009, his
retirement had to come sooner rather than later.
 David Cheesewright has been promoted from
President & CEO of EMEA to head up International.
 He has previously also headed the Canadian business and
oversaw the integration of the Massmart acquisition in subSaharan Africa and the acquisition of the UK Netto stores.
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Cheesewright comes with
a very good reputation
and significant and
diverse experience across
both geographies and
retailing disciplines – key
requisites for the
International division.
© Walmart
 A UK national, Cheesewright started his career with Asda. where
he held leadership positions in operations, merchandising,
logistics, strategy and format development.
3. Global: Q4 Strategic Changes
Africa: Muted performance at Massmart.
 Acquired with a fanfare back in 2011, trading at
Massmart continues to be subdued – and there is
limited evidence to date of Walmart exercising its
muscle in Africa.
 Massmart announced preliminary group turnover growth of
7.5% for the year to 29 December 2013. Like-for-like sales
increased 3.8%, but taking into account internal inflation of
2.7%, volume growth was just above 1%.
 Massdiscounters, the general merchandise and food retail
division, proved the group’s weakest performer - sales grew 1%
on a like-for-like basis, with internal inflation of 0.5%.
Masswarehouse, the group’s warehouse clubs division,
increased sales 4% with inflation running at 2.1%.
 Walmart’s position in Africa is difficult to gauge. Massmart’s
reported like-for-like figures seem weak against initial
expectations of an emerging market like South Africa, but they
are reflective of continued high unemployment and the low
consumer confidence levels currently rife in wider the market.
 Expectations that Walmart would quickly impose its established
business model in Africa and revolutionize the market look
increasingly misguided.
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Initially, the roll-out of FoodCo food departments within
Game stores was expected to become the main expansion
vehicle for food operations. However, the smaller, less
established, Cambridge Food chain is increasingly proving
a more suitable candidate for rapid expansion. Unlike
Game, Cambridge Food has the benefit of being a
predominantly food-focused format
4. Outlook
Costco has outperformed Sam’s Club since Q3 2011. But the divergence has
widened in the intervening period and has been massive over the last quarter.
Sam’s Club vs. Costco; Quarterly Comp Sales Growth, 2011-2014 (%)
8
7.0
7
6.0
Year-on-Year Growth (%)
6
5.7
6.0
6.0
5.4
5.0
6.0
6.0
6.0
5.3
5.0
5.0
5
4.0
4.2
4.2
4.0
4.0
4
3.0
2.7
3
2.3
1.7
2
1.1
1
0.2
0
-0.5
-1
2011 Q1
2011 Q2
2011 Q3
2011 Q4
2012 Q1
2012 Q2
Costco
2012 Q3
2012 Q4
2013 Q1
2013 Q2
Sam's Club
N.B. Costco’s financial year-end is September, Sam’s Club’s is January, so there is roughly one quarter’s time lag i.e. Costco’s Q1 figures correlate more to Sam’s Club’s Q4 figures.
Source: Planet Retail
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2013 Q3
2013 Q4
2014 Q1