Wal-Mart Cheers Investors With Revenue Growth, Upbeat Outlook--2nd Update
May 19 2016 - 10:05AM
Dow Jones News
By Sarah Nassauer and Joshua Jamerson
Wal-Mart Stores Inc. posted surprise revenue growth in the first
quarter and offered an upbeat view for the second, indicating that
the company's efforts to improve stores and make operations more
efficient are starting to pay off.
Shares of Wal-Mart jumped 9.2% to $68.95 in premarket trading
and had risen 3% this year as of Wednesday's close.
The world's biggest retailer has been spending heavily to get
customers back into its stores. It has worked to better stock
stores, improve efficiency and increase pay for its employees,
while investing heavily in e-commerce. Wal-Mart has warned that
those efforts would dent profits this fiscal year. Indeed, the
number of people visiting Wal-Mart stores increased 1.5% but profit
fell 7.8% in the first quarter.
Sales at Wal-Mart's U.S. stores open at least a year ticked up
1%, marking the seventh straight quarterly gain after a long
stretch of declines. Analysts polled by Consensus Metrix expected
0.5% growth in the metric.
"We are encouraged by the Wal-Mart U.S. comp and believe it's
attributable to real improvement in our store experience," said
Wal-Mart Chief Executive Doug McMillon in a conference call to
discuss earnings. Executives predicted that same-store sales would
rise about 1% in the second quarter.
Wal-Mart's results stand out from a list of retailers with
disappointing starts to the year. On Wednesday, Target Corp.
reported that consumers pulled back on spending, with its chief
executive citing "an increasingly volatile consumer environment."
Soft results from department stores like Macy's Inc. and Nordstrom
Inc. illustrated shoppers' shift away from brick-and-mortar stores
and spurred declines across the retail sector.
Wal-Mart gets more than half its revenue from grocery products,
which analysts have said could shield it from some of the pressures
on brick-and-mortar retailers, as food shopping has been slower to
shift online. Executives have said they are working to improve the
grocery business, ensuring foods freshness and offering a wider
selection of brands. Results Thursday showed low-single digit
growth in grocery sales, in part due to deflationary pressures.
"There are not a lot of holes to pick," in today's numbers, says
Brian Yarbrough, retail analyst at Edward Jones. "The problem is
longer term a 1% store sales rise is not going to get you to where
you need to be in terms of earnings and revenue," he says.
Wal-Mart's numbers reinforce the idea that retail is now a
landscape of winners and losers. Many retailers have been closing
weaker locations and investing in e-commerce as consumers shift
online shopping and fast-fashion chains. But the moves haven't been
enough to counter weak demand for some, particularly apparel
retailers and department stores including Macy's.
Still, off-price chain TJX Cos. and home-improvement stores like
Home Depot Inc. have reported healthy traffic and spending at their
locations, suggesting that some consumers are willing to spend but
are being more selective about where.
Wal-Mart's e-commerce global sales growth continued to slow,
rising 7% in the first quarter, down from 8% growth in the previous
quarter.
Over all, Wal-Mart posted a first-quarter profit of $3.08
billion, or 98 cents a share, down from $3.34 billion, or $1.03 a
share, a year earlier. Wal-Mart had forecast earnings of 80 cents
to 95 cents a share. Analysts anticipated 88 cents.
Revenue rose 0.9% to $115.9 billion. Excluding currency impacts,
revenue rose 4%.
For the second quarter, company said it expects earnings between
95 cents and $1.08 a share. Analysts were expecting a
second-quarter profit of 98 cents.
Write to Sarah Nassauer at sarah.nassauer@wsj.com and Joshua
Jamerson at joshua.jamerson@wsj.com
(END) Dow Jones Newswires
May 19, 2016 09:50 ET (13:50 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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