A strong showing from Sam’s in 2Q
Same-stores sales increased 4.2%, total sales increased 4.6% to $12.5 billion and operating profits advanced 10.1% to $536 million.
Impressive is how Sam’s Club president and CEO Rosalind Brewer characterized the warehouse club operator’s performance during the second quarter.
"We grew the top line, delivered positive comps, and most important, grew operating income faster than sales," she said during a pre-recorded message. "We continue to deliver steady traffic to the clubs. We believe that the improvements in our quality and overall merchandise offerings are key to driving these results."
Sam’s is eyeing a 3% to 5% increase in third quarter comps and also expects to open as many as seven new clubs, a rate of growth Sam’s hasn’t experienced in more than a decade.
According to Brewer, member engagement scores are at record levels and Sam’s is investing in price to offer more compelling values on an upgraded product offering. As a result, the same store sales increase of 4.2%, on top of a prior year gain of 5%, was driven by an increase in member traffic and average transaction size. The improved engagement scores could be the result of the addition to self-checkout at more clubs. Self-checkout will be in half of Sam’s Clubs location by the end of the third quarter, eliminating a potential pain point for members as Sam’s looks to improve labor productivity.
Brewer, like her predecessor Brian Cornell and other executives before him, offered limited disclosure around membership renewal rates and upgrade activity. Primary member renewal activity was said to be, "steady," while Plus membership sign ups continued to grow to an unspecified penetration rate.
In terms of category performance, Brewer said grocery produced high single digit comps while beverages and the fresh, freezer and cooler areas produced mid single digit comps. A category defined as "table top" and personal paper categories experienced high mid single digits comps. Tobacco sales produced an unspecified drag on comps, according to Brewer.
Technology, entertainment and office categories achieved low single digit comp growth with performance strongest in portable electronics such as tablets, but challenged by continued softness in video games, movies, and books.
The apparel and home categories produced high single digit comps while the health and wellness area advance in the high mid single digits. Hearing aid centers achieved double-digit comps for the quarter with a high mid single-digit comp in the nonprescription drug department and a low single digit comp in prescriptions.