Walmart plows forward in Q2
A fourth consecutive quarter of same-store sales growth at Walmart’s U.S. business helped the company achieve a slightly better than expected profit performance.
Walmart said second-quarter earnings grew 8.3% to $1.18, one cent better than the consensus estimate of analysts and at the top of the company’s forecast range of $1.13 to $1.18. Total company sales increased 4.5% to $113.5 billion, and net income increased 5.7% to slightly more than $4 billion. The key driver of the improved performance was continued strength of the Walmart U.S. business where same-store sales increased 2.2%, within the company’s guidance range that called for an increase of 1% to 3%.
“I’m really pleased with the continued momentum we see in our Walmart U.S. stores, and this now marks three consecutive quarters of positive comp traffic and four quarters of positive comp sales,” said Wal-Mart Stores president and CEO Mike Duke. “There’s such a clear focus among the leadership team to drive the strategy of broad assortment and price leadership. We continue to win back customers and attract new ones. We will not let up on our passion to reduce operating expenses so that we can invest in lower prices. This is the promise that our customers expect from Walmart and what drives greater loyalty.”
Sales at U.S. stores grew 3.8% to $67.4 billion, while operating profits increased 5.3% to $5.25 billion.
“Customers are responding to our continued focus on providing the right assortment at everyday low prices,” said Walmart U.S. president and CEO Bill Simon. “During the quarter, our average comp traffic increase was equal to serving on average, 80,000 additional customers every day of the 13-week period.”
At Sam’s Club, sales increased 3.8% to $14.2 billion and same-store sales, excluding fuel, increased 4.2%, on top of a prior year increase of 5%. Operating profits grew at a much faster pace, advancing 10.1% to $536 million.
“We believe that the improvements in our quality and overall merchandise offerings are key to driving these results,” said Sam’s Club president and CEO Rosalind Brewer. “In fact, member engagement scores continue to achieve record levels. We’re also investing in price to deliver greater value on top of these quality improvements.”
Internationally, sales increased 6.4% on a constant currency basis to $32 billion and operating profits increased 5.4% to nearly $1.5 billion. A strengthening of the U.S. dollar had a major impact on the comparisons to the prior year. On a constant currency basis sales would have increased by 7.2% to $32.3 billion and operating profits would have increased 11.9% to $1.6 billion.
“Every market delivered positive comps, and I’m pleased that our largest markets, the United Kingdom, Mexico and Canada, collectively delivered stable growth, solid margins and expense leverage, despite challenging environments,” said Walmart International president and CEO Doug McMillon.
Buoyed by a solid second quarter showing, Walmart increased by a penny and narrowed its full year profit forecast to a range of $4.83 to $4.93 from a prior range of $4.72 to $4.92.
Money: It’s not all employees want
When employers act as though the 1959 song “Money (That’s What I Want)” represents employees’ top priorities in the workplace, they miss some of the most important drivers of satisfaction and engagement.
“It is well known that money is a short-term motivator,” Jayne Mattson, senior vice president, Keystone Associates, told SHRM Online. Ultimately, employees look for an organization and position where their values are met, core skills are utilized and work tasks align with interests, she said.
Pay does help attract and even retain employees, according to Towers Watson, a global professional services company, but “sustainable engagement” requires much more than money. According to Towers Watson, sustainable engagement is a combination of:
• Traditional engagement: employees’ willingness to expend discretionary effort;
• Enablement: the tools, resources and support employees need to do their jobs effectively; and
• Energy: a work environment that supports employee well-being.
The Towers Watson 2012 Global Workforce Study, released July 11, 2012, and reflecting the views of more than 32,000 employees around the world, found that although pay was the No. 1 way to attract and retain employees, the top five factors affecting sustainable engagement are:
• Stress, balance and workload;
• Goals and objectives;
• Supervision; and
“In every study that has ever been conducted, money is always fourth or fifth on the list of factors that drive employee loyalty and satisfaction,” Rick DeMarco, managing director of the West Coast Office of Inward Strategic Consulting told SHRM Online. “That’s not to say that a fair wage for the job is not important … Employees expect to be fairly compensated … but that’s an expectation and not a driver of their long-term loyalty and commitment.”
Making engagement sustainable
“Sustainable engagement is an important evolution in the science of workforce behavior,” said Laura Sejen, global practice leader, rewards for Towers Watson, in a statement. “It recognizes that employees need support from their employer to continue to give discretionary effort on the job.”
Unfortunately, employees are not getting the level of support they need, she noted.
“Enablement and energy are critical factors in this equation,” added Julie Gebauer, managing director, talent and rewards, Towers Watson, in the same statement. “Engagement will only hold over time with these elements in place.”
Towers Watson found that just 37% of U.S. workers are sustainably engaged — meaning they scored high on engagement, enablement and energy. About a quarter (27%) are classified as “unsupported,” meaning they display characteristics of traditional engagement, but lack the enablement and/or energy required to sustain it. Thirteen percent are described as “detached,” meaning they feel enabled and/or energized but are not willing to expend discretionary effort for their employer. And almost one-quarter (23%) are completely disengaged, with less favorable scores in all three areas.
Understanding engagement gaps
Towers Watson found that the most significant factors for the 27% of the work force defined as “unsupported” are supervisor support, stress levels and their workloads. More specifically:
• 43% agreed their supervisors had adequately removed obstacles that could impact performance.
• 26% agreed that management involved employees in decisions affecting them.
• 48% felt the amount of work they had to do was reasonable.
• 40% felt they had enough employees in their work group to get the job done correctly.
By comparison, those deemed “highly engaged” by Towers Watson responded favorably to those questions by a margin of a least 30 percentage points higher than unsupported workers.
As for the 13% deemed “detached,” company leadership is the focal point:
• Just 25% said they had trust and confidence in the performance of their company’s senior team — a 52 percentage point disparity from the 77% of highly engaged workers who agreed with the statement.
• Similarly, just 26% felt that senior leadership had a sincere interest in employees’ well-being — 45 percentage points lower than highly engaged respondents.
“Everyone in an organization has a role to play in helping close gaps in employees’ feelings of enablement and energy — from executives, to supervisors, to human resources, to employees themselves,” Gebauer added in the statement.
The survey targeted employees working in large and midsize organizations across a range of industries in 29 markets around the world. It was fielded online during February and March 2012. The U.S. sample included 3,600 employees.
Money matters less than other factors
Other studies and experts agree that money matters, but not as much as other aspects of the job and work environment.
In March 2012, PsychTests.com, an online personality, career and IQ assessment company, released research on the top motivators for employees. The data collected between August 2011 and February 2012 revealed that out of a list of 23 work motivators, “financial reward” was ranked 12th.
For men, financial reward was eighth on the list; for women, 15th.
Seventy percent of the 1,194 employees surveyed were from North America. Sixty-four percent of respondents were under the age of 30.
The top five motivators reported were:
• Customer orientation: the desire to make customers happy;
• Achievement: the desire to work in a goal-oriented and challenging work environment;
• Inspiration: the desire to inspire others through one’s work;
• Identity and Purpose: the desire to work in a company/field that is in line with one’s values and ethics; and
• Fun & Enjoyment: the desire to work in a position/corporate culture that is inherently entertaining.
“When managers think of motivation and incentives, many of them automatically assume it has to be a bonus or some other financial reward,” said Ilona Jerabek, Ph.D., president of PsychTests, in a statement. “This is clearly not what employees need … at least, not money alone,” she added.
That’s true even among those working in professions focused on financial rewards according to the nearly 2,800 financial advisors surveyed by J.D. Power and Associates for the 2012 U.S. Financial Advisor Satisfaction Study released in March 2012. Organizations that provide the right mix of technology and support to financial advisors, thus optimizing the time they spend with clients, generate more employee satisfaction than those focused on financial gain for employees.
Companies that struggle to deliver the support employees need to be effective pay the highest retention and signing bonuses to compensate for a poorer work experience, according to David Lo, director of investment services at J.D. Power and Associates.
What employees want
DeMarco said employees want to:
• Be part of something bigger than themselves.
• Know what’s going on in the company and feel included in the company’s plans.
• Be recognized and rewarded for outstanding effort.
“All of these drivers require a concerted effort by a company to educate, inform and inspire employees around a common vision and culture, to provide them the tools and resources to deliver effectively on the brand promise and business strategy and to reward and recognize them,” he added.
“When employees’ values are met, using the skills they excel in the most and doing work they find interesting, they are career-satisfied and fully engaged,” Mattson said. “Money is an added bonus … However, it is not the driving factor for engagement.”
Rebecca R. Hastings, SPHR, is an online editor/manager for SHRM.
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Sears Q2 net loss narrows
Hoffman Estates, Ill.-based Sears Holdings reported a second-quarter net loss of $132 million, compared with a loss of $146 million in the year-ago period.
Revenues totaled $9.5 billion for the quarter ended July 28, down 6% from $10.1 million in the second quarter of 2011. The company cited lower domestic comparable-store sales for the quarter and the effect of having fewer Kmart and Sears Full-line stores in operation. Sears Canada’s comparable-store sales also decreased and included a decline of $55 million due to changes in foreign currency exchange rates.
"We continue to make progress against the priorities we outlined in our fourth quarter earnings release and call. In particular, we have improved our profit position, as we reduced expenses and expanded margin rate through more effective promotional design,” said Lou D’Ambrosio, Sears Holdings’ CEO and president. “We have also successfully lowered inventory, reduced debt from year end, and enhanced our liquidity. In addition, the Sears Hometown transaction remains on track to close in the third quarter."
Domestic-comparable store sales declined 3.7%, comprised of declines of 2.9% at Sears Domestic and 4.7% at Kmart. The largest impact was in consumer electronics. Lawn and garden also declined due to drought conditions.
Earlier this week, Sears also announced that it would be spinning off its Hometown and Outlet stores, along with some hardware stores, into a separate, publicly traded company.
For the first 26 weeks, Sears reported net income of $57 million, compared with a loss of $316 million in the prior-year period. Revenues for this period totaled $18.7 million, down 5% from $19.7 million in 2011.