Behind Walmart’s Success Nielsen’s 2008 Year-End Review Looks At The Numbers

Behind Walmart’s Success Nielsen’s 2008 Year-End Review Looks At The Numbers

Yesterday, Wal-Mart Stores Inc. reported earnings for the fourth quarter of 2008 that beat analyst expectations, an all-too-rare occurrence in the retail world today.  Revenue increased 1.7 percent to $109.1 billion on U.S. store sales that grew 6 percent.  In its comprehensive year-end review of Wal-Mart, Nielsen looks at how the company innovates and differentiates itself from competitors as well as trends across categories.

Sales across all of the company’s key divisions – Walmart Stores, Sam’s Club and International – grew on a year-to-year basis by more than 6 percent.  Comparable store sales in the U.S. grew 2.8 percent in 2008.

“Every player in the CPG industry is affected by Walmart in some way,” said Tom Pirovano, Director of Industry Insights at Nielsen.  “By combining several Nielsen services, we can measure Walmart store count growth, Walmart advertising, Walmart shopper demographics and what shoppers are buying.”

The key to Walmart growth: food departments.  Sales of dry groceries, perishable foods and alcoholic beverages all showed strong results (11%, 11.5% and 18.5% respectively).  The top five food and beverage categories were pet food, bread and baked goods, carbonated beverages, snacks and packaged meat. Top growth categories were flour, pasta, vegetables & grains -dry, wine and shortening/oil.

Like many retailers, Walmart has seen solid growth in sales of private label (PL) products as consumers look to get the most value for their money.  Private label sales share was 15.8 percent across all Nielsen categories, with milk, sugar/sugar substitutes, unprepared meat/seafood, shortening/oil and canned fruit making up the top five categories.  Additionally, Walmart’s PLs outperform the grocery channel in a number of channels and can serve as a benchmark for other retailers.

Although Walmart has significant operations across the country, southern and western regions have most of the markets where Walmart dominates total sales:

Market Walmart Share of All Outlet Sales
New Orleans/Mobile 42.9%
Oklahoma City 42.5%
Birmingham 40.2%
Memphis 39.7%
Nashville 33.2%
Dallas 31.9%
Raleigh-Durham 29.5%
Louisville 29.5%
Salt Lake-Boise 28.3%
Houston 27.4%
Source: Homescan Channel Facts, CY ’08

While many top retailers have cut back advertising spending, Walmart actually increased spending by 56 percent in 2008, with a focus on groceries, furniture and health and beauty. More than 21 percent of their spending is on network television, with another 20 percent on cable. Almost 7 percent of their spend is on Spanish language network TV.

But Walmart is not immune to changing consumer behaviors: shoppers are making fewer trips.  And the company remains under-developed with higher income households.  Walmart continues to adapt to the market environment with a number of innovations such as their new Marketside format to attract upscale shoppers without the Walmart name or the “Big Box” image.