Sam's Club expanding organic selection

by Monica Watrous
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The wholesale club is adding products that hit on trends of health and wellness and portability.

 

BENTONVILLE, ARK. — Sam’s Club is refreshing its food business with on-trend products and categories. The wholesale club, which is a division of Wal-Mart Stores, Inc., expanded its selection of “healthy, on-the-go and exciting” items and delivered positive low-single digit comparable sales for its food and beverage segments during Walmart’s third quarter.

“We have significantly expanded our organic portfolio this quarter and plan to more than double it by the end of next year,” said Roz Brewer, president and chief executive officer of Sam’s Club, during a Nov. 13 call with financial analysts to discuss third-quarter performance. “Other new items, such as chia seeds, breakfast bars and squeezable fruit pouches hit on key trends… and members have responded.”

Frozen meats, fruit, seafood and vegetables also delivered growth during the quarter, reflecting consumer demand for convenience at a value, she added.

Elsewhere in Sam’s Club’s food categories, inflation in dairy and meat remained, prompting members to shift to chicken and ground beef, and produce results were mixed, due to a stone fruit recall, deflation in potatoes, and weather-related headwinds.

Sam’s Club operates 643 locations in the United States and Puerto Rico. Net sales at Sam’s Club grew 2.3% to $12.7 billion during the quarter, and comparable sales rose 0.4% with balanced growth in traffic and ticket. Membership and other income grew 9.9%.

Sam’s Club’s performance was one of several bright spots for Wal-Mart during the quarter, but the retail giant acknowledged more work is needed to deliver stronger sales growth and strengthen bottom-line performance overall.

Income from continuing operations attributable to Wal-Mart in the third quarter ended Oct. 31 dropped 0.4% to $3,711 million, equal to $1.15 per share on the common stock, which compared with $3,727 million, also $1.15 per share, in the year-ago period.

Revenues totaled $119,001 million, marking a 2.9% improvement over $115,688 million reported for the third quarter of the previous year.

Wal-Mart U.S. net sales increased 3.4% to $70,025 million for the quarter, reflecting a 0.5% increase in comparable sales and strength in the Neighborhood Market format.

“I’m encouraged that comp sales were positive in Q3, but we are still not satisfied,” said Doug McMillon, president and chief executive officer. “We have areas to improve, including in the customer experience and in our price leadership position, and we are taking the steps necessary to fix these areas.”

Operating income for Wal-Mart U.S. declined 1.2% on higher health care costs and ongoing investments in e-commerce. Wal-Mart U.S. reported flat comparable sales and a small increase in market share for its grocery business.

“Net inflation increased approximately 210 basis points versus last year, primarily led by meat and dairy,” said Greg Foran, president and chief executive officer of Wal-Mart U.S. “Offsetting the majority of this inflation were SNAP-related headwinds and customers trading down in high-inflation categories.”

As a key point of Wal-Mart’s enterprise strategy, the company highlighted efforts to improve its fresh food offering. Mr. McMillon recounted an interaction with a customer in a Chicago Wal-Mart store who “strongly encouraged us to add more organic produce. She was right; we needed more.

“We are seeing opportunities, large and small, to get better.”
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