Wal-Mart Canada Corp.'s aggressive push into groceries is bearing fruit, although the discounter is feeling the pinch of bigger investments in e-commerce, lower prices and restructuring.
The Canadian division of the world's largest retailer, based in the U.S., said on Thursday its fourth-quarter sales picked up even though its operating profit slipped.
And its grocery business, including food, household goods and health and wellness items, was particularly strong, said David Cheesewright, chief executive of parent Wal-Mart Store Inc.'s international division.
"Over all, we're pleased with the positive sales trend we've seen in our Canadian operations and we expect the momentum to continue," Mr. Cheesewright told a conference call.
Wal-Mart Canada has put a big focus on bolstering its grocery business, converting more stores to its larger supercentre model, which includes full supermarkets and putting pressure on rivals to lower prices.
However, now that U.S. discount rival Target Corp. has announced it will leave Canada and shut its 133 stores here by mid-May, Wal-Mart and its rivals may feel an easing of the industry strains later in 2015.
Wal-Mart also could get a boost if it buys some of the leases of Target stores to expand even further here, although other retailers also are believed to be vying for some of the Target leases. Wal-Mart has not commented on whether it will bid for some of the leases.
In its fourth quarter, Wal-Mart Canada reported "strong" sales in the staples of food, consumer products and health and wellness merchandise. Those are the types of products that tend to bring shoppers to stores more often, as opposed to discretionary items, such as clothing, which consumers don't necessarily need as much.
The discounter's previous pattern of declining shopper store traffic improved in the fourth quarter, with traffic up 0.1 per cent, the company said. And consumers spent more on each shopping trip, with fourth-quarter purchase amounts up 1.7 per cent, it said.
There are signs that Wal-Mart Canada is stealing grocery sales from rivals. The discounter's market share in food, consumables and health and wellness items picked up by 0.43 per cent in the 12 weeks ended Jan. 24, according to researcher Nielsen.
The chain's sales of fresh food such as fruits and vegetables reached their highest level of the year in the fourth quarter, Mr. Cheesewright said.
He said Wal-Mart's holiday season in Canada was strong overall, with its online business jumping 38.5 per cent. However, its non-grocery and apparel sales "were still below the rate of growth in the market," but improved from previous quarterly results, he said.
Wal-Mart Canada is estimated to generate about $23-billion in annual sales. The retailer doesn't break out the amount of its sales in this country.
Wal-Mart Canada's overall fourth-quarter sales grew 4.1 per cent while same-store sales rose 1.8 per cent, marking the third consecutive quarter of positive sales at outlets open a year or more, the company said. Those sales are considered an important indicator of a retailer's health. However, the retailer's operating profit fell an undisclosed amount in the quarter as a result of spending on e-commerce, discounting as well as a restructuring which saw the loss of about 210 head office jobs.
U.S. parent Wal-Mart Stores Inc. reported overall a better-than-expected fourth-quarter profit as shoppers spent more of their savings from lower gas prices at the company's stores. However, the company cut its sales forecast for the coming year, citing currency issues.
Wal-Mart, whose shares were down almost 2 per cent in early trading, said it now expected sales to increase 1-2 per cent, below its previous forecast of 2-4 per cent.
It also forecast earnings of $4.70-$5.05 per share, below the average analyst estimate of $5.19.
Wal-Mart reported a 1.5 per cent increase in same-store sales in the United States, its second straight quarter of growth after six quarters of flat or declining sales.
Analysts on average had forecast a rise of 0.7 per cent, according to research firm Consensus Metrix.
Net profit attributable to Wal-Mart rose to $4.97-billion, or $1.53 per share, for the quarter ended Jan. 31, from $4.43-billion, or $1.36 per share, in the same period a year earlier.
Excluding items, the company earned $1.58 per share, according to Thomson Reuters I/B/E/S.
Total revenue rose 1.4 per cent to $131.57-billion.
Analysts on average had expected earnings of $1.53 per share on revenue of $132.35-billion.
On the labour front, Wal-Mart, long criticized for its low hourly pay and employee benefits, said it would increase wages for half a million U.S. employees this year. Wal-Mart's hourly full-time and part-time workers will earn at least $1.75 (U.S.) above the current federal minimum wage, or $9 an hour, starting in April, it said. Current employees will earn at least $10 an hour by Feb. 1, 2016, the company said.
Wal-Mart, which has about 1.3 million U.S. workers, has been a target for activists in the contentious national debate over proposals to raise the minimum wage.
With files from Reuters