Walmart shoppers may have paid fewer visits to its stores early this year, but foot traffic and sales could be improving, according to one analyst.
In the first quarter of this year, Walmart store traffic shrank about 1.8 percent, notes MKM Partners Senior Analyst Patrick McKeever, who said he expects the company to report better traffic and about a 1 percent increase in same-store sales in the second quarter.
Wal-Mart (WMT) has been losing market share to stores like Dollar General (DG) and Family Dollar Stores (FDO) as those retailers add more food and beauty products to their shelves, McKeever told "Big Data Download." And some shoppers prefer dollar stores simply because they’re smaller and easier to get in and out of than Walmart stores, McKeever said.
"They have been kind of nipping at Wal-Mart's heels for a while now," McKeever said, adding that same-store sales at dollar stores have been up about 3 to 4 percent.
And while Wal-Mart may be known for its lean operations, the company pays significantly more than companies like Amazon to ship orders placed online, and it shouldn't have to, McKeever said.
"Given that two-thirds of Americans live within five miles of a Walmart store, we believe the stores’ physical proximity to customers can be a big advantage in reducing these costs," McKeever wrote in a recent research note.
While Amazon pays about $3 to $4 to ship a package, Wal-Mart pays $5 to $7 per package, McKeever said.
Online sales make up only about 2 percent of Wal-Mart's overall sales, McKeever estimates. But those sales are increasing about 30 percent every quarter, he said. Online sales will likely reach $10 billion this year, according to McKeever's estimates. Amazon’s online sales reached $61.1 billion last year, the analyst noted.
-- McKeever does not own Wal-Mart shares.
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