Wal-Mart Stores Inc. touted strong sales at its U.S. grocery stores and a big start to holiday layaway sales on Wednesday, helping to send shares of the world's largest retailer to an all-time high despite a downturn in the overall stock market.
Walmart has lined up $400 million in U.S. layaway sales in less than a month, half of the amount shoppers put on hold for all of the 2011 holiday season, as the chain makes a concerted push to entice shoppers before the typical start of the holiday season.
Shares of Wal-Mart traded as high as $76.81 on Wednesday as the company held its annual meeting with analysts and investors, which was also broadcast over the Internet. The shares closed up 1.7 percent at $75.42. Wal-Mart was one of just four gaining stocks in the Dow Jones Industrial Average, which closed down more than 128 points.
Walmart U.S. plans to more than double the number of its Neighborhood Market grocery stores in the United States by fiscal 2016, putting more pressure on grocers such as Kroger Co., Safeway Inc. and Supervalu Inc.
The stores, which are smaller than traditional supercenters and focus on groceries, have become more profitable as Walmart adds more of them. Sales at existing Neighborhood Market stores have grown at a rate of more than 5 percent, or double the rate of the overall Walmart U.S. chain.
"They kind of have the keys to the castle now," Susquehanna Financial Group analyst Bob Summers, who has a "buy" rating on Wal-Mart, said of the Neighborhood Market format.
Walmart should have more than 240 Neighborhood Market stores by the end of fiscal 2013, ending in January, and more than 500 by fiscal 2016, ultimately adding more than $10 billion in sales, U.S. Chief Executive Bill Simon said.
In the year since the last investor meeting, Wal-Mart's U.S. arm, by far its largest business, has rebounded from a prolonged slump. At the same time, its international operations have come under scrutiny following a New York Times article in April about alleged bribery at its Mexican unit.
Investors have shrugged off the bribery probe, which has already cost Wal-Mart tens of millions of dollars as it takes a closer look at operations around the globe. Shares of Wal-Mart are up roughly 22 percent since just before the New York Times story was published, compared with a 3 percent increase in the Dow Jones industrial average, of which they are a component.
More than half of Wal-Mart's shares are owned by the family of founder Sam Walton.
PLACING BIG ORDERS FOR HOLIDAY SEASON
Walmart U.S. is preparing for a strong holiday season, ordering twice as many Apple Inc. iPads and other tablet computers as last year, said Duncan Mac Naughton, the chief merchandising and marketing officer at Walmart U.S.
The company also started offering layaway in mid-September, a month earlier than it did when it brought the service back in 2011. With layaway, shoppers buying certain items can put them on hold and pay for them over time.
"They could conceivably do 50 percent more layaway this year than they did last year," which has the potential to add half a percentage point to same-store sales growth, said Summers.
Walmart U.S. has now posted four consecutive quarters of same-store sales growth after nine straight quarterly declines, though the pace of growth slowed to 2.2 percent in the second quarter from 2.6 percent in the first quarter. The pace of quarterly same-store sales growth still trails competitors such as Target Corp and Dollar General Corp.
Plans for Walmart U.S. this holiday season include offering sale prices on certain toys on Tuesdays based on weekend feedback from social media followers and using 100 "Twitter elves" to help with marketing and customer service on the popular microblogging site. At the Sam's Club warehouse chain, holiday season plans include selling Children's Place merchandise in its stores, said Sam's Club CEO Rosalind Brewer.
Wal-Mart is gaining market share nearly everywhere it runs stores and still sees its international business as a growth engine despite its decision to slow down store openings in some key countries, said Chief Executive Mike Duke.
Duke also said he believes the company is "playing to win in a very real way now" in e-commerce. He said he is pleased with Wal-Mart's progress in online search and other areas.
Wal-Mart still plans to open more stores around the world, but as it said earlier this year, it will slow down store openings in Brazil, China and Mexico. In Brazil and China, Wal-Mart has said it wants to work on making improvements in its hundreds of stores. Meanwhile, the store approval process in Mexico, where its local affiliate has more than 2,000 locations, has slowed and become more complex following allegations that the company had bribed government officials to speed up approvals.
Walmart U.S. plans to add roughly 205 stores this fiscal year, and about 220 to 240 in fiscal 2014. Sam's Club plans to open 9 stores this year and 10 to 15 next year.
Walmart International plans to add 21 million to 23 million square feet of store space in fiscal 2013, down from an original target of 30 million to 33 million. It plans to add another 20 million to 22 million square feet of store space in fiscal 2014.
© 2014 Thomson/Reuters. All rights reserved.