Wal-Mart Posts Strong Holiday Sales, But E-Commerce Battle With Amazon Pinches Profit -- Update
February 21 2017 - 10:18AM
Dow Jones News
By Sarah Nassauer
Wal-Mart Stores Inc. reported strong sales over the winter
holiday season, a marked contrast with the weak numbers posted by
many brick-and-mortar competitors including Target Corp. and Macy's
Inc.
Wal-Mart said Tuesday that sales in stores open at least 12
months rose 1.8% in the quarter ended Jan. 31, the 10th consecutive
quarter of gains. More shoppers came to its stores and spent more
when they did. But the strength of the company's U.S. store
business continues to come at the expense of profits, which fell
18% in the quarter.
The retail behemoth is investing billions to raise U.S. store
worker wages, lower prices and expand e-commerce sales to better
compete with Amazon.com Inc.
"Rapid advances in technology mean we need to become more of a
digital enterprise -- and that's what we're doing," Chief Executive
Doug McMillon said in a prerecorded call to discuss the
results.
Still, Wal-Mart's global e-commerce sales growth decelerated
compared with the previous quarter. Online sales rose 16% including
the first full quarter of sales from Jet.com Inc., which Wal-Mart
purchased in September. In the previous quarter e-commerce sales
rose 21%.
Wal-Mart's U.S. store changes are bearing fruit at a time when
many retailers tethered to large store footprints are struggling,
challenged by shoppers gravitating to less-profitable online buying
and discounters offering low prices. Investors have become wary of
the retail market after several reported weak holiday sales
including Target, Macy's and Kohl's Corp.
In 2016, while retail sales rose across the board, signaling a
strengthening economy, online retailers took most of the
spoils.
During the year spending rose 11% at online retailers and fell
almost 6% at department stores, according to Commerce Department
figures.
Macy's is closing stores and laying off thousands of staffers as
it struggles to draw shoppers. On Tuesday, the company reported
that comparable-store sales fell 2.1% in the latest quarter and its
profit dropped 13%. Macy's said it raised $673 million from selling
real estate and would continue to explore options for its
properties.
Sears Holding Corp. is also closing dozens of stores and earlier
this year received a $1 billion injection of financing from its
chief executive, hedge-fund manager Edward Lampert.
Among the turmoil Warren Buffett's Berkshire Hathaway dumped
$900 million worth of Wal-Mart shares at the end of 2016, nearly
exiting the stock, according to federal filings.
Wal-Mart's share price rose 3% in early trading to $71.43.
The same-store sales increase was driven by strength in
Wal-Mart's health and wellness business, helped by branded drug
price inflation, an increase in prescriptions and higher
over-the-counter sales. The grocery business continued to face
pressure from food-price deflation while strong apparel sales led
growth in the general merchandise category.
Wal-Mart also on Tuesday announced a 2% dividend increase to
$2.04 a share annually.
Over all for the period that ended in January, Wal-Mart reported
a profit of $3.76 billion, or $1.22 a share, compared with $4.57
billion, or $1.43 a share, in the year-earlier quarter.
Revenue rose 1% to $130.94 billion. Excluding currency swings,
the company said revenue would have climbed to $133.6 billion.
For its year that ends in January 2018, Wal-Mart expects to earn
between $4.20 and $4.40 a share, in line with previous statements
that earnings would be flat. Analysts, polled by Thomson Reuters,
expected $4.33 a share.
--
Joshua Jamerson
contributed to this article.
Write to Sarah Nassauer at sarah.nassauer@wsj.com
(END) Dow Jones Newswires
February 21, 2017 10:03 ET (15:03 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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