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Walmart Canada sales decline in first quarter

Walmart Canada’s nationwide expansion is driving total sales increases at the discount retailer as it muscles up to compete with Target, but performance at existing stores declined in the first quarter of fiscal 2014, according to earnings figures released Thursday.

Overall, sales at Walmart Canada were up 6.1 per cent, driven by new stores and expanded locations.

But sales at stores open more than a year, considered a key metric in retail, were down 1.3 per cent over the same time last year. Customer traffic was down two per cent, but customers who did shop Walmart were buying more — basket size increased 0.7 per cent.

“Walmart Canada faced a challenging quarter as consumer spending weakened due to higher household debt levels. Our results were impacted by the unseasonably colder weather this year versus unseasonably warm weather last year and the leap year,” said Doug McMillon, president and CEO of Walmart International, in an earnings call.

The same period last year included an extra day of sales due to the leap year. The company’s 13-week first quarter fiscal 2014 runs from Jan. 26 to Apr. 26, 2013.

Diluted earnings per share (EPS) were $1.14 (all figures U.S.), a 4.6 per cent increase compared to last year’s first quarter EPS of $1.09, but shy of analysts’ expectations of $1.29.

The company expects to deliver EPS for Q2 of between $1.22 and $1.27, compared to $1.18 last year.

Same-store sales were also down 1.4 per cent at Walmart U.S., for the first time since the summer of 2011.

The company cited a delay in income tax refund cheques, challenging weather conditions and a payroll tax increase as factors in U.S. sales declines.

Walmart International grew net sales 2.9 per cent to $33 billion.

Target began opening stores in March in Canada and had 24 operating in Ontario by the beginning of April.

Walmart Canada recorded some gains in food, consumables and homelines, offset by a decrease in entertainment, apparel and hardlines.

Operating expenses grew faster than sales, primarily due to the drop in same-store-sales and the cost of adding new stores and square footage to existing stores in Canada.

Desjardins Securities analyst Keith Howlett rated the impact as neutral.

Walmart Canada entered the new fiscal year with 379 stores (209 supercentres, 170 discount stores) compared to 333 stores (164 supercentres, 169 discount stores) a year earlier, Howlett noted.

A total of nine net new stores will be added, and by year end 37 additional supercentres will be in operation (for a total of 246 supercentres and 142 discount stores).

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