Grocery improvement remains a focal point for Wal-Mart Stores Inc. as it continues work to strengthen sales and improve store traffic.
Chief Financial Officer Charles Holley, speaking Wednesday at the Bank of America Merrill Lynch 2015 Consumer and Retail Conference, said new Wal-Mart U.S. CEO Greg Foran is "very focused" on grocery improvements.
Foran has a background in grocery and has identified that segment of the business, particularly fresh food items, as needing work. Fresh food categories include dairy, eggs and cheese; bakery and bread; produce; deli, and beef, pork, poultry and seafood.
About 56 percent of Wal-Mart's annual sales in the U.S. come from the grocery segment. Wal-Mart is the nation's largest grocer.
"You've got to run a great fresh area if you're in the food business," Holley said. "We also know we've got to do a better job in our deli areas and our bakery areas and our meat areas. I think we've upgraded some of those, but I think we have a longer way to go. We need to not just satisfy a customer need. We should be exceeding some of those."
Wal-Mart U.S. reported same-store sales improvement of 1.5 percent in the fourth quarter of 2015. It was the highest sales increase in nine quarters.
Neighborhood Markets, which primarily sell groceries, showed same-store sales increases of 7.7 percent.
Analysts expected lower gas prices to affect Wal-Mart sales. The retailer's core customer makes under $50,000 annually, Holley said, pointing out that lower fuel prices had led consumers to put more money into savings, but also to buy more food.
Organic food remains a potential growth area for the company, which launched its Wild Oats brand in April 2014, according to reports. Wild Oats is now available in 3,800 of its approximately 4,000 U.S. stores after first being launched in about 2,000 locations. Wal-Mart also offers about 50 Marketside Organic products, and it has begun placing organic foods in specifically branded sections of about 2,300 stores.
A survey of customers last year revealed that 90 percent were interested in organic and sustainable food products at affordable prices. Holley said Wal-Mart remains confident that it can use its scale to keep costs low.
Wal-Mart is hoping the additional offerings and focus on improving the in-store experience for customers will help improve sales.
Wal-Mart ranked last among 18 competitors in the American Customer Satisfaction Index survey released last month. The retailer scored a 71 among the roughly 70,000 shoppers polled. Wegmans and Trader Joe's topped the list.
Kroger, the nation's No. 2 grocer and Wal-Mart's biggest competitor, ranked ninth in the survey.
A change in customer satisfaction will likely be incremental, said American Customer Satisfaction Index managing director David VanAmburg. Benchmarks of the survey include store location, variety and selection of merchandise, layout and cleanliness of store, and availability.
"You're not going to jump from 68 to 80 in a year," VanAmburg said. "When you've lost trust or there is years and years of reputation built up, you're not going to change overnight. You're not going to convince people that you've changed overnight."
Foran said during the company's fourth-quarter earnings call that he was pleased with the increases seen by Wal-Mart U.S. He noted that work remains as the retailer looks to improve store traffic and sales.
"We still have a lot further to go in terms of what we want to achieve there," Foran said. "But both fresh and dry grocery performed pretty much as we expected they would perform."
Business on 03/05/2015