Strategic Preview: Q1

1. Strategic Preview: Q1 February - April 2013 13 May 2013 STEPHEN SPRINGHAM Senior Retail Analyst

2. Strategic Preview: Walmart Q1 “A slowdown domestically in Q1 has already been telegraphed by Walmart itself. A challenging comp base (+3.0% in Q1 2012) has been exacerbated by weak consumer demand, as core US customers were hit by the double whammy of the expiry of payroll tax breaks and delays in receiving income tax rebates. Walmart previously gave guidance of “around flat” comp sales growth in the US in Q1, but there are fears the business could disappoint slightly on the downside if the performance of rival Target is anything of a barometer of wider consumer malaise. Over Q1, Walmart outlined its 2013 investment plans for a number of its key international markets, including the UK, China, Mexico and Central America. The common denominator in each was an increase in investment, but in true Walmart style, with an underlying mantra of “doing more for less”. However, there are interesting contrasts between the respective investment strategies. In China, there will be a necessary acceleration in the rate of store remodels in tandem with a fresh wave of new openings. By contrast, Asda in the UK will see a marked deceleration in new store development, but increased investment in e-commerce initiatives. More generally, it is encouraging to see Walmart increasingly apply leverage (one of its key watchwords) not just operationally, financially and on expenses, but also in terms of ‘best practice’ across its various markets. • Analyst Comment: STEPHEN SPRINGHAM Senior Retail Analyst

3. Expectations for the Quarter US: Q1 Strategic Changes Global: Q1 Strategic Changes Outlook What’s new at Planet Retail Strategic Preview: WalmartQ1

4. In its Q4 results presentation, Walmart already flagged a slowdown in Q1 and predicted “around flat” comp sales in the US. • 1. Expectations for the Quarter Actual Like-for-Like Sales Projected Like-for-Like Sales

5. A leaked trading e-mail overshadowed the Q4 results. Unsubstantiated rumours of President & CEO’s Mike Duke’s possible departure from the helm risk doing the same for the Q1 results. • Any speculation over leadership/succession should not deflect attention away from the wider issues. Domestically, the consumer and trading environment remains very challenging and the business will do well to even achieve its earlier prediction of flat comps in Q1. • Two pressing issues demanded immediate responses in Q1 in the US: arresting the decline in traffic and addressing the perceived problems in out-of-stocks/‘empty shelf’ syndrome. A number of initiatives have been launched in response to both. • As ever, international is likely to provide a mixed picture, although generally sales growth will be muted rather than explosive – but the company will undoubtedly stress that operating income grew faster than sales in most markets. • Encouragingly, we are starting to see improved leverage of ‘best practice’ across the Walmart family. Examples of this include a wider roll-out of the George clothing brand, both across the Walmart international estate and through e-commerce. More encouragingly still, there is tangible evidence of a more concerted and joined-up approach to e-commerce generally. • Challenging environment both domestically and internationally. • 1. Expectations for the Quarter