Wal-Mart Earnings: What to Watch
November 15 2017 - 7:29AM
Dow Jones News
By Sarah Nassauer
Wal-Mart Stores Inc. is scheduled to report its third-quarter
financial results before the market opens on Thursday. Here is what
you need to know:
EARNINGS FORECAST: Analysts are expecting earnings-per-share of
97 cents, according to Thomson Reuters, roughly flat with
Wal-Mart's year-ago earnings of 98 cents a share.
REVENUE FORECAST: Analysts forecast $121 billion in revenue, up
from $118.18 billion a year ago.
WHAT TO WATCH:
STORE STRENGTH: Analysts expect to see gains in store sales and
foot traffic, marking over three years of quarterly growth on both
fronts at a time when some competitors are losing ground. Wal-Mart,
the world's largest retailer by sales, has invested in its
brick-and-mortar locations, raising wages for hourly employees,
reducing inventory and adding more online pickup options. It has
estimated that same-store sales in the U.S. will rise 1.5% to 2%,
its Sam's Club business up 1% to 1.5%. In addition, since it bought
online retailer Jet.com last September, several weeks of Jet sales
will be included in its same-store sales figures for the first time
this quarter.
E-COMMERCE EFFORTS: Wal-Mart has turned the tide on sluggish
e-commerce sales growth, with U.S. online sales up at least 60% the
last two quarters, including revenue from a series of small
acquisitions this year. That is noteworthy in the wake of
Amazon.com Inc.'s purchase of Whole Foods, and analysts have taken
notice. "Today what matters most is changing the narrative to
demonstrate a credible, viable strategy against Amazon," said
Barclays in a research note. "Wal-Mart has made significant
progress in changing the narrative."
Wal-Mart sells over 67 million products on its site, up from
just 8 million early last year, which has contributed to the
increased sales, and it is marketing its site and online grocery
pickup options more aggressively. It now expects e-commerce sales
growth of 40% for the coming fiscal year.
PROFIT AND MARGINS: Wal-Mart's investments in its stores and
e-commerce have weighed on its profit and margins, both of which
continue to be closely watched by analysts. U.S. gross margins
declined the last two quarters, and Wal-Mart is expected to report
another slight decline for Q3. In the U.S., operating income has
grown slightly the last two quarters, after a long period of
decline. "Any dip back into decline would be cause for concern,
especially if driven by gross margin deterioration," said Morgan
Stanley in a note.
(END) Dow Jones Newswires
November 15, 2017 07:14 ET (12:14 GMT)
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