Wal-Mart was the darling of the recession. It capitalized a nation that needed to rein in spending, and as the consumer traded down, Wal-Mart's revenue went up.
But since the intensity of the financial crisis has waned, so has Wal-Mart's growth. In fact, it's same-store sales in the U.S. have declined for five consecutive quarters.
The economy had a modest recovery and Wal-Mart made some missteps. Now, the message from its investor meeting on Wednesday was clear: things are changing and things are getting better.
"I have to say, I do feel good about the Wal-Mart U.S. plans," said CEO Mike Duke, who oversees a company with more than $400 billion in annual revenue. "And I expect to see positive sales results in the fourth quarter."
In some respects, that was the biggest headline.
But, there are two ways to look at the statement. On the one hand, it's positive, since domestic growth has been so elusive. But it also seems to indicate that the current quarter, which will be reported next month, will be the sixth consecutive quarter with negative comps. Duke didn't say that, but he assuredly said it would be positive in the fourth quarter.
Beyond that, there are several important takeaways from the meeting. The one that wasn't overly interesting to analysts—they didn't ask about it—but extremely interesting for the media, was Apple .
Wal-Mart will begin selling the iPad later this week, and it was announced Wednesday that Sam's Club will also carry it, along with the iPhone.
The company did not touch on the strategy behind the move. It's either a way to keep up with Target , Best Buy and Amazon —who are also carrying it—because consumer electronics has emerged as a critical segment of the retail business. Another possible justification is using it as a loss leader to get the higher-income customer back in the doors.
Walmart, however, is not discounting the iPad, whereas Target is giving a 5 percent break to loyal customers.
International Playing 'a Bigger and Bigger' Role
Duke made sure he discussed the shifting domestic business. The company has abandoned the "rollback" pricing approach and is back to "everyday low prices." The rollbacks didn't work in terms of sparking sales, so that promotional angle is gone.
Another shift is their product mix. Some items were taken off shelves to streamline product lines and inventories. That backfired too, and the company is putting some of them back in the stores.
The company also talked more about a strategy that's been in the works for some time: smaller stores. This is more of a long-term project for Wal-Mart as it trys to gain traction in urban areas where dollar stores are much closer to customers—and more accessible.
While on the topic of dollar stores and rivals like Taget, take a look at Wal-Mart stock on a year-to-date basis. It's up less than 2 percent, lagging its rivals by a wide margin.
Take Target on the higher end, for example. It's up double-digits in 2010. The outperformance on the lower end is even more pronounced. Family Dollar is up about 65 percent this year.
The consensus is that lower-income families have been pressured even more by the weak economy, while the middle-income group feels less pressure and has returned to Target after the period of trading down.
Bill Simon, the new CEO for the U.S. division, doesn't wholly agree.
"Our business in over $70,000 in household income is robust in growing in both sales and traffic," says Simon, who did go on to admit there is definite pressure on the lower end. "Our opportunities in the core customer, the middle- and lower-income base, some of it is due to the actions we took, some of it is due to competitors who've become very aggressive in this space, and some of it is due to the economy."
There is a definite focus on getting the domestic story right, but Wal-Mart cannot ignore its international business, which now amounts to a quarter of its overall revenue.
"International is going to play a bigger and bigger role in driving growth at Wal-Mart," said Duke. "There is no doubt about it."
There's still no doubt how large and how powerful the Wal-Mart brand remains, but if you listen to what the company told investors this week, returning to strong domestic growth could take a while.
Since Wal-Mart does not report comps on a monthly basis, the next big temperature check for the company will be November 16 when it reports earnings.