Wal-Mart Sales Rise as Retailer Dodges Industry Malaise -3rd Update
August 17 2017 - 3:53PM
Dow Jones News
By Sarah Nassauer and Austen Hufford
Wal-Mart Stores Inc.'s sales rose in the latest quarter, boosted
by an e-commerce surge and strong grocery sales, as the world's
largest retailer continues to brush off the malaise afflicting some
competitors.
But as has become typical for brick-and-mortar stores, the
growth came at a cost. The company invested in lowering prices,
improving stores and driving online sales, and in the quarter its
expenses rose and margins fell.
Sales at Wal-Mart's U.S. stores open at least a year rose 1.8%
in the fiscal second quarter ended July 28 -- the 12th consecutive
increase -- boosted by a 1.3% rise in foot traffic.
"Our customers are responding to the improvements in stores and
online," Wal-Mart Chief Executive Doug McMillon said Thursday.
The world's top retailer by sales said it expects third-quarter
earnings of 90 cents to 98 cents a share. It said it sees full-year
profit of $4.30 to $4.40 a share, compared with an earlier estimate
of $4.20 to $4.40.
The strong sales figures come at a time of stiff competition
among retailers facing Amazon.com Inc. While U.S. consumer spending
appears strong, according to July sales data at retailers and
restaurants released Tuesday, some apparel and department-store
chains are struggling with customers' changing shopping habits.
U.S. grocers, of which Wal-Mart is the largest by sales, are
battling over prices.
Results at other companies have varied this season, with
department stores Macy's Inc. and Kohl's Corp. reporting declining
sales, though both pointed to signs of improvement. Sporting-goods
retailer Dick's Sporting Goods Inc. posted a sluggish 0.1% sales
increase in existing stores, while Home Depot Inc. and discounter
TJX Cos. said their quarterly sales were strong. On Wednesday,
Target, which like Wal-Mart has put a renewed focus on lowering
prices, reported sales growth and raised its profit forecast.
Wal-Mart's second-quarter online sales in the U.S. surged 60%.
The company purchased online retailer Jet.com in September,
followed by deals for smaller sites such as ModCloth, Moosejaw and
ShoeBuy. Jet.com founder Marc Lore took the helm of Wal-Mart's U.S.
e-commerce operations, and he has helped advance services like
two-day shipping on more products and discounts on in-store pickup
for some orders. Mr. Lore told reporters on Thursday that those
efforts are driving the gains in online sales.
Wal-Mart U.S. CEO Greg Foran said the company plans to offer
online grocery pickup in 1,100 stores by the end of the year.
To pay for the efforts, the company over the past year has used
automation to replace some jobs and laid off more than 1,000
corporate employees. It has also pressured suppliers to cut their
prices, increased the fees they pay to pass inventory through
warehouses and narrowed the shipping window suppliers must hit to
avoid fines.
Even so, Wal-Mart's U.S. gross margin fell and operating
expenses rose 3.9% in the second quarter.
"We are not at the place we want to be from an expense
standpoint," Wal-Mart finance chief Brett Biggs said in an
interview.
Wal-Mart shares were off 1.9% at $79.46 in midday trading.
In a note, GlobalData Retail analyst Neil Saunders said that
Wal-Mart can withstand the pressure, calling it "one of the few
firms that have the firepower to cope with the push toward
compressed prices and margins."
Wal-Mart's grocery sales grew as it lowered prices and worked to
improve its fresh offerings. Executives are focused on the category
in the wake of Amazon's purchase of Whole Foods Market Inc. in June
and the U.S. expansion of discount grocers like Germany's Aldi and
Lidl. Food categories delivered Wal-Mart's strongest quarterly
sales in existing stores in five years, aided in part by inflation,
said the company.
Over all, Wal-Mart earned $2.9 billion, or 96 cents a share,
compared with $3.77 billion, or $1.21 a share, in the year-earlier
second quarter. On an adjusted basis, which excludes certain debt
and asset-sale-related charges, earnings were $1.08 a share, up
from $1.07 a share. Revenue grew 2.1% to $123.36 billion.
Write to Sarah Nassauer at sarah.nassauer@wsj.com and Austen
Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
August 17, 2017 15:38 ET (19:38 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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