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.
Walmart (NYSE:WMT)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Walmart Charts.
Walmart (NYSE:WMT)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Walmart Charts.