Reuters: What are you seeing in terms of the impact of food inflation? We hear of rising prices for a gallon of milk or higher prices for corn products. How is that affecting your shopper?
 
Schoewe: We’re seeing the inflation that you’re describing. I don’t think that’s having as significant an impact on our customer as gas. Now, you have to take all of this into consideration because at the end of the day, somebody has just so much money to spend, so if there’s inflation in food, if there’s inflation in gas, it’s going to impact them.
    I think the raw economics and the psychological impact of gas prices, which are featured only daily in the media, has a psychological impact on our customers as well.
    So, yes, food inflation is impacting traffic etc. but in my gut I don’t believe it’s the same impact as petroleum based inflation
 
Reuters: When you talk about making sure that people know that you are the price leader, how is that being played out to make sure you message is getting out to the consumer?
    
Schoewe: All you have to do is go into our stores and see we’re working as hard as we can to get that message across, whether it’s the signage in the stores or even the ads that you’ll see on TV. What we’re trying to do is let the customer know that when times are tough, Wal-Mart is the right place to go and that’s the best value that you can get and that value proposition is something that our customer trusts.
 
Reuters: What about store traffic? Do you give overall quarterly traffic results?
 
Schoewe: We do not provide specifics. But I can tell you that — for all the reasons we’ve just described — one of the main reasons if not the main reason that our comp (comparable) store sales are below expectations is because traffic is not what we would like in our stores.
    
Reuters: So if you’re looking at traffic that is not what you want and you may have to emphasize low prices a little bit more, is there a worry that you won’t get the volume you need to post sales gains?
    
Schoewe: No. If you think about our business model, it’s all about keeping expenses low. If we do that, that means we can provide a good value to our customer at a low price. One of the metrics that we would have released this quarter that’s really most impressive would be selling, general and administrative expenses as a percentage of sales, which were basically flat to the prior year despite the difficult sales environment. So what that tells you is we’re doing everything we can to keep that value proposition in place.
 
Reuters: How much SG&A can you cut? Do you still have the flexibility there to use SG&A to make up for the lack of sales?
 
Schoewe: The short answer is yes. We have significant opportunity to do a better job in selling, general and administrative expenses, and that’s across the board. That would include in-store labor and the productivity in store. That would include the headcount and overall expense levels here in our home office. I’d love for you to quote me on that one because that’s a message that I continue to beat pretty hard here at home.
 
Reuters: That you have flexibility with headcount at the home office?
    
Schoewe: And productivity in the field as well.
 
Reuters: So do you see reducing headcount at the home office this year?
 
Schoewe: No. What we need to do is continue to improve the productivity of the workforce that we have. When you are growing as rapidly as we are, it’s pretty hard to reduce headcount.
 
Reuters: I know we touched on gas prices, food inflation. What is your view on the housing market and how that is playing into how your customers are shopping?
    
Schoewe: Clearly it can’t be helpful. And whether it’s unemployment, or just job activity in general, the state of the housing situation is just one more set of headwinds for retailers in general. Not just us, but for everybody. Again what I’d ask you to think about is the demographic inside of our store. We would probably have more in the way of opening price-point shoppers than some of our competition. So as that customer goes, so goes our business.
 
Reuters: There was talk on your recorded call about home and apparel sales, and hopes that they will get back on track by the back-to-school season. Does that make the second half of the year even more important for you to show you can get U.S. sales back on track?
    
Schoewe: Short answer: yes. I think the proof is going to be in the numbers when we start reporting Q3 and Q4. There’s an awful lot of activity here and hopefully that will turn into very good results.

As expected, the shift of Easter season sales into the March reporting period cut into April sales. Cold and wet weather for much of the quarter just made the situation worse, especially for apparel sales.

Retailers are now left hoping Saturday, the day before Mother’s Day, will help rescue the spring selling season. The Saturday before Mother’s Day was the second highest sales volume day in 2006 … behind the Friday after Thanksgiving.

The following table shows same-store sales results for U.S. retailers, compared with analysts estimates.

The table includes the range of mean estimates* given by analysts polled by Reuters, the average of those means#, and the actual change in same-store sales reported by the companies^.

All figures expressed in percentage change over the same period last year except number of estimates.

##For U.S. stores

^^For Bon-Ton and Carson’s combined

Wal-Mart has been pushing for expansion of RFID (radio-frequency identification) chips to help manage inventory, reduce theft and lower distribution costs, but has met critics on matters ranging from the cost of the technology to consumer privacy.

Wal-Mart has also been pushing several measures to help the environment, including calling on suppliers to cut down on packaging materials and by promoting sales of energy efficient light bulbs.

In a speech Monday, Wal-Mart Chief Information Officer Rollin Ford tied the two causes together.

“Our focus on using RFID to improve in-stocks for our customers means eliminating extra trips they may make to our store, or to others,” he said in a statement by Wal-Mart summarizing his comments.

“On a daily basis, more than 24 million people shop our stores. If 100,000 extra trips are avoided by having items in stock, we will save customers $22.8 million a year in gas savings and reduce greenhouse gases by 80,209 metric tons.

Does “green” finally mean “go” for RFID? 

Read the full Reuters story

(PHOTO: WalmartFacts.com)