Ahead of the Tape: Wal-Mart Deserves Credit for Web Effort -- WSJ
May 18 2017 - 3:03AM
Dow Jones News
By Steven Russolillo
It has been an earnings season to forget for retailers. Wal-Mart
Stores Inc., the biggest of all, at least appears better-positioned
than most.
The world's largest retailer's fiscal first-quarter earnings,
out Thursday, should show steady progress at a time when
brick-and-mortar competitors are stumbling. Even with Wal-Mart's
shares trading near a two-year high, results should be good enough
to support more gains.
Analysts polled by FactSet forecast quarterly earnings of 96
cents a share, down two cents from a year earlier. Wal-Mart has
exceeded analysts' estimates for six straight quarters. Revenue for
the period that ended in April is expected to have increased 1.6%
to $117.8 billion. Importantly, sales in stores open at least 12
months are expected to increase for an 11th straight quarter.
Wal-Mart has been raising wages, cutting prices and growing
online sales, particularly in the U.S. These are necessary
investments that have weighed on earnings. But more people have
been going to Wal-Mart's stores and actually buying stuff --
something few retailers can brag about these days.
As a result, Wal-Mart's U.S. business has taken on added
importance. Domestic sales accounted for 63.4% of its overall total
in its most-recently completed fiscal year that ended in January,
the highest in seven years and up from a low of 58.5% four years
ago. For the first quarter, analysts estimate U.S. sales increased
2.5%, higher than overall expected top-line growth.
Investors also are giving Wal-Mart the benefit of the doubt as
it bulks up its e-commerce operations. The strategic shift started
last year when Wal-Mart bought Jet.com for $3.3 billion and
installed the site's founder, Marc Lore, as the company's head of
U.S. online operations. Wal-Mart has since made several smaller
e-commerce purchases, such as ModCloth, Shoebuy and Moosejaw.
The Jet purchase helped juice online sales in the U.S., which
rose 29% in the fourth quarter from a year ago. Now Wal-Mart is
pushing in-store pickup of online orders as a way to get people to
keep going to their physical locations. Wal-Mart is charging online
buyers less if they go to stores and pick up their orders, a
strategy aimed at competing with rival Amazon.com Inc.
Shares have jumped 9% over the past three months while the Dow
Jones Industrial Average has been roughly flat. That has pushed
Wal-Mart's valuation to a rich 17 times projected earnings over the
next 12 months. But in this turbulent retail environment, paying up
for steady performance is a fair trade-off.
Write to Steven Russolillo at steven.russolillo@wsj.com
(END) Dow Jones Newswires
May 18, 2017 02:48 ET (06:48 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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