Wal-Mart Lifts Profit Outlook as Sales Grow--Update
August 18 2016 - 8:45AM
Dow Jones News
By Joshua Jamerson and Sarah Nassauer
Wal-Mart Stores Inc. reported stronger-than-expected same-store
sales growth in the latest period, with slightly more shoppers
heading to its stores at a time when many retailers are struggling
to attract foot traffic.
The retailer also lifted its profit outlook for the year. Shares
rose 3.1% to $75.18 in premarket trading, which would be the
highest level in a year for the stock.
Same-store sales at Wal-Mart's U.S. stores rose 1.6%, above its
guidance for a 1% increase. Meanwhile, traffic rose 1.2%.
Many traditional retailers have struggled recently to grow sales
and adjust to customer's changing online shopping habits. Target
Corp. said Wednesday that same-store sales fell for the first time
in more than two years as fewer shoppers visited its locations,
while Macy's Inc. last week said it would shut 100 more stores, or
14% of its physical base, as shoppers increasingly opt to make
purchases online and spend more on services than on goods.
Demand for clothing and household items in recent years has been
markedly softer than during past economic recoveries. What demand
there is has been shifting online away from traditional retailers
such as Macy's, Kohl's Corp. and Nordstrom Inc., which all reported
lower quarterly sales this week.
Bentonville, Ark.-based Wal-Mart has been spending heavily to
get customers back into its stores. It has worked to better stock
its stores, improve efficiency and boost the pay for its employees.
"Comp store inventory was down 6.5% and in-stock levels are up,"
said Wal-Mart chief executive Doug McMillon on a conference call.
Operating, selling, general and administrative expenses climbed
4.6% in the latest period.
The company has also invested in its lackluster online
operations as Amazon.com Inc. continues to grow sales quickly.
Earlier this month, the company announced plans to purchase
discount e-commerce retailer Jet.com Inc. for $3.3 billion, the
largest purchase to date of an e-commerce startup. Wal-Mart also
tapped Jet's founder Marc Lore to lead its e-commerce efforts once
the deal is complete.
In the second quarter, Wal-Mart reported global e-commerce sale
rose 11.8%, the first time in nine quarters the retailer's online
sales growth has increased quarter-over-quarter.
During the quarter Wal-Mart offered a free monthlong trial of a
$49 two-day shipping membership similar to Amazon's popular Prime
program and rapidly ramped up the number of items available on
Walmart.com. Until May, the technology behind Wal-Mart's website
capped the number of products it could display to shoppers at
around 8 million. "We made advancements in the U.S. on our key
priorities to build digital relationships with customers, scale the
assortment and expand online grocery," said Mr. McMillon.
Walmart.com now sells 15 million items, he said.
Wal-Mart is also trying to make its produce, meat and grocery
business more prominent for shoppers, an effort at the heart of its
plan to fend off Amazon as consumers still tend to shop offline for
fresh food. During the quarter, the company reported strong traffic
in food and consumables, such as beauty and cosmetics, in its
grocery segment. The company also reported stronger pharmacy sales,
helped by drug price inflation and more prescriptions filled.
Meanwhile, apparel sales were helped by a focus on basics,
though entertainment sales were soft. Target also reported weakness
in electronics sales.
Over all, Wal-Mart reported earnings of $3.77 billion, or $1.21
a share, compared with a year-earlier profit of $3.48 billion, or
$1.08 a share. Excluding the gain from the sale of its Yihaodian
website in China, the company earned $1.07 a share. The company had
said earnings would land between 95 cents and $1.08 a share.
Revenue edged up 0.5% to $120.85 billion. In constant currency,
revenue rose 2.8%. Analysts estimated $120.16 billion in
revenue.
The company now sees full-year earnings in a range of $4.15 to
$4.35 a share. Analysts were expecting $4.27. The company
previously guided for earnings between $4.00 and $4.30. For the
current quarter, the company is projecting 90 cents to $1 in
per-share earnings, in line with the consensus estimate for 94
cents a share.
Write to Joshua Jamerson at joshua.jamerson@wsj.com and Sarah
Nassauer at sarah.nassauer@wsj.com
(END) Dow Jones Newswires
August 18, 2016 08:30 ET (12:30 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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