Wal-Mart, the world’s largest retailer, reported its third-quarter profit rose 9.3 percent from a year earlier to $3.44 billion for the quarter ending October 31. Despite weak U.S. sales, the company raised its full-year profit outlook as the retailer expects continued gains from its robust international sales. U.S. domestic namesake stores saw same-store sales fall 1.3% and profits increase 1.9%, while international sales jumped 9.3% and earnings increased 14%. The firm’s international operations now account for about a fourth of the firm’s annual revenue. It was the sixth straight quarter for same-store sales declines in the United States. The firm’s low-income customers continue to struggle in the weak economy and the firm has worked its way through merchandizing and management changes. Wal-Mart seeks to broaden its international operations, which according to Chief Executive Mike Duke continue to “deliver impressive results.” Mr. Duke cited China and Japan as growth markets and said India was an up and coming country for the company. In order to attract U.S. customers, Wal-Mart is moving away from aggressive price cuts and returning to its “Everyday Low Prices” strategy which worked well in the past. The firm previously announced it would offer free shipping on more than 60,000 products bought over the Internet during the holidays. This holiday season will be crucial for Wal-Mart since it appears to be losing U.S. customers to its competitors including Target, German grocer Aldi, and bargain-basement “dollar stores.”
QUESTIONS FOR DISCUSSION:
- Wal-Mart has indentified China, India, and Japan as potential growth markets for its international operations. Discuss the challenges Wal-Mart is likely to face in its operations in these countries.
- In the United States, Wal-Mart continues to see a pronounced pattern of paycheck shopping where consumers shop at midnight as soon as their paycheck or unemployment checks post to their account. Identify potential opportunities and challenges this shopping pattern might create for the firm.
- Wal-Mart is offering free shipping on more than 60,000 products bought over the Internet during the holidays. Analyze the advantages and disadvantages of this marketing tactic.
SOURCE: Bustillo, M. (2010, November 17). Wal-Mart sales show rivals at its heels. Wall Street Journal, p. B3. (Retrievable online at: http://online.wsj.com/article/SB10001424052748704327704575613861567263350.html)
RELATED ARTICLE: Sanchanta, M. (2010, November 15). Wal-Mart bargain shops for Japanese stores to buy. Wall Street Journal, p. B1. (Retrievable online at: http://online.wsj.com/article/SB10001424052748703560504575612141078994842.html)
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