By  on March 13, 2009

NEW YORK — While domestic retailers worry about when the economy will improve so consumers come out of their shopping funk, Wal-Mart Stores Inc. is using its Every Day Low Price strategy to capture market share around the world.

“Our customer is being impacted all over the world by this economy,” Charles Holley, Wal-Mart’s chief financial officer, said Thursday at the Bank of America 2009 Consumer Conference. “Our mission, ‘Save people money, so they can live better,’ resonates better than ever. We’re delivering on that across the world now in over 7,000 units, 3,600 of them international.”

The retail giant is sitting pretty in terms of its balance sheet. Holley said Wal-Mart has $11.6 billion in free cash flow, more than double last year’s amount. Meanwhile, the free cash flow of Wal-Mart’s top 10 competitors equaled just $8 billion when added together.

Wal-Mart will use some of the money for new stores, repurchasing shares and paying shareholders dividends, which rose to $1.09 in fiscal 2010, from 95 cents in fiscal 2009.

“We’re being opportunistic,” Holley said. “There are going to be some opportunities over the next few months. These crises always produce opportunities.”

He cited Chile as an example of the type of deal Wal-Mart might be looking for. The company completed a tender offer for all outstanding shares of common stock and all outstanding American Depository Share that it doesn’t own of Distribución y Servicio D&S SA or D&S, a Chilean retail company.

“We went through a lot last year in all global economies,” Holley said. “We’re very encouraged by what our business is doing in these countries. We have over 50 store brands around the world. It’s not just about the Wal-Mart banner. You’ll see more like Todo Dias Brazil. Vicente [Trius, executive vice president, president and ceo of Wal-Mart Asia] has a lot of experience in multiple nameplates and sizes.”

Wal-Mart’s positioning has allowed it to outperform many of its competitors. U.S. comp-store sales increased 5 percent in the four weeks ended Feb. 27. Wal-Mart’s earnings per share rose 6 percent in 2008. At a time when many retailers are trying to deal with bulging inventories, Wal-Mart’s are growing at half the rate of sales.

“We’ve increased price rollbacks,” Holley said. “We have over 40 percent more than a year ago and we’re not going to take our foot off the accelerator. We don’t think this environment is going to go away any time soon.”

Transitioning from 2009 to 2010, Holley said Wal-Mart’s “operations and merchandising momentum is very strong. We have a strong balance sheet and liquidity. Our pricing message, merchandising and operations are very well aligned. Ticket price has increased and store traffic has increased. Customers need the ELP. We’re gaining market share of consumers making over $65,000 and those making less than $65,000 equally. Everybody now is focused on saving money.”

Three tough areas — home, hard lines and apparel — are improving. “Apparel is still a little bit negative, but compared to the competition, we stack up well,” Holley said. “The discipline our merchants have, clarity of assortments, pricing and signage — it all seems to be coming together.We brought in OP and LEI did fantastic. Even though apparel was negative, LEI was positive.” Holley hinted there may be more such labels ahead. “We know you need brands there [in apparel,]” he said. “You can’t play with all private labels.”

The hard lines and apparel businesses in the U.K. are even tougher than in the U.S., yet “we’re seeing good positive comps in George’s apparel,” Holley said. “Fashion and value are resonating with our customer.”

He added the company continues to gain market share in the U.K., where ASDA is outperforming the market and SGMA is lower than major competitors.

“We’re cautiously optimistic about Japan,” Holley said. “Doug [McMillon, president and ceo of international,] wanted me to make sure I worded this carefully. The economy is struggling there. Our comps have been positive for the last three or four months and traffic is up. We rolled ELP out to 100 different categories.”

Holley reminded analysts that Wal-Mart no longer gives monthly guidance — it instituted 13-week guidance instead — but offered that March will be an unusual month due to Easter being in April this year. He also warned about the anniversary of last summer’s government stimulus checks, which put money in consumers’ pockets and added 100 to 200 basis points to comp store sales. “We know we’re up against that in the second quarter,” he said. “We are working hard on plans to offset that. This year’s stimulus package is not like last year’s. Last year there was a direct impact.”

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