NEW YORK — An explanation of Wal-Mart’s rise from retail giant to global juggernaut over the last several years can be summed up in one word: food.
A recent report by Goldman Sachs analyst George Strachan examining segment results from Wal-Mart’s 10-K filings with the Securities and Exchange Commission indicated that grocery goods have been “the principal driver” of sales at the retail giant. In the report, Strachan examined annual results from 2003, 2002 and 1998, using rounded numbers and a five-year basis to present a broad view of how grocery goods have risen to the top.
According to the report, grocery sales, including tobacco and candy sales, have experienced a compound annual growth rate of 12.8 percent since 1998.
In 2003, groceries led all categories with estimated sales increasing 20 percent to $45.3 billion from $37.7 billion the previous year. Comparatively, grocery sales came in at $15.3 billion in 1998 and was the third-largest category.
Not surprisingly, groceries accounted for the largest percentage of total sales in 2003, coming in at 26 percent of total sales compared with 24 percent the previous year. In 1998, groceries accounted for 16 percent of total sales.
With management focused on expanding its supercenter concept, Strachan sees groceries continuing to feed growth for many more years. “We continue to regard domestic supercenters as the main driver of Wal-Mart’s growth,” said Strachan.
Strachan derives confidence in his view from company management, which upped its guidance on the number of supercenters it intends to open to between 230 and 240 in 2005. Of those, 150 existing discount stores will undergo conversions into supercenters.
Currently, the company operates 1,471 supercenters with an average retail space of 187,000 square feet.
“It is clear that grocery continues to drive shopping frequency into Wal-Mart’s supercenters,” Strachan said.
Selling more than Food at Wal-Mart
Wal-Mart Stores Inc. may be building its retail empire on grocery sales, but the world’s biggest company also sells somewhere in the neighborhood of $30 billion a year in apparel. Wal-Mart is also the largest retailer of home goods. Moreover, the retailer’s Web site offers shoppers a colossal mix of goods, from jewelry and accessories to garden products and electronics. Here’s a sample of some of the items WWD found on walmart.com:
Movies & Music:
Beethoven Symphony No. 5, “Herbert von Karajan conducts the Berlin Philharmonic,” $21.23
“Beethoven’s 5th,” “Sara takes Beethoven to spend summer vacation with wacky uncle Freddie,” $19.98
Image 631 Deluxe Six-Person Hot Tub, $4,478
Easy Set Swimming Pool, 864 square feet (bigger than many New York apartments), $348
Sports & Fitness:
DAC SportSafe Portable Gun Safe with Two-Gun Capacity, $69.96
Trout Unlimited Colorado 9-foot Pontoon Boat, $388.68
The Oxford English Dictionary, $2,850
Erica Jong’s “Fear of Flying,” $7.19
1-carat Round Diamond Solitaire Ring in Platinum, $3,288
Sterling Silver Cubic Zirconia Bubble Earring and Pendant Set, $14.97
Garden & Patio:
Elegant Odontoglossum Orchid in Striking Brass Pot, $39.74
“The Humanure Handbook: A Guide to Composting Human Manure,” $11.97
Tatung 50-inch high definition plasma TV, $5,498
RCA 13-inch color TV, $77.84
— Dan Burrows