Walmart, Big Retail Chains Ride U.S. Economy as They Battle Amazon
May 17 2018 - 11:44AM
Dow Jones News
By Sarah Nassauer and Suzanne Kapner
A strong U.S. economy and recent store improvements are helping
Walmart Inc., Macy's Inc. and many other big retail chains
recapture revenue they have lost to online shopping.
Buoyed by low unemployment and rising wages, Americans are
buying everything from apparel to groceries to dishwashers. Many of
the chains, stung by competition from Amazon.com Inc., have closed
hundreds of weaker stores, leaving them with less inventory and
better locations.
But not all chains are benefitting -- J.C. Penney Co. reported
Thursday another quarter of weak sales -- and executives at several
chains said cold April weather weighed on the latest results.
Executives at several chains that reported their latest results
this week also said they haven't yet seen much of a boost from the
U.S. tax overhaul that should leave households with more spending
money this year.
Walmart, the world's biggest retailer, said Thursday that sales
rose both online and in stores, driven by higher grocery sales and
lower web prices. The results eased some fears earlier this year
that growth on the e-commerce side of its business was slowing.
The economy is strong overall, but some shoppers are feeling the
pinch from rising gas prices, said Walmart Chief Financial Officer
Brett Biggs in an interview. "What we are seeing in the stores
feels like what it's felt like over the last 24 to 48 months," he
said.
The Commerce Department said Tuesday that April retail sales --
a measure of spending at stores, shopping websites and restaurants
-- rose a seasonally adjusted 0.3% from the prior month. The April
increase followed a stronger-than-expected month of spending growth
in March, a relief for analysts who had worried about a late-winter
slowdown in consumer spending.
Walmart reported that U.S. same-store sales rose 2.1% in the
latest quarter. Walmart said e-commerce sales rose 33% from a year
ago, up from 23% growth last quarter. E-commerce still accounts for
a sliver of the company's business, but it is the fastest growing
part.
Grocery sales were strong, although other product sales were
somewhat sluggish due to "unseasonably cool weather in April,"
Walmart said. That has since reversed, said executives.
Penney and Home Depot Inc., which reported earlier this week,
also cited cool weather for sluggish April sales. Home Depot's
same-store sales still rose 4.2%, driven by home-improvement
projects.
Shares of Penney tumbled 11% in Thursday morning trading, while
Walmart shares slipped 1.5% and Macy's gained 3%.
On Wednesday, Macy's said sales, excluding newly opened or
closed locations, rose 3.9% during the quarter, a sign that the
department-store giant is pulling out of a prolonged slump. "The
customer is feeling confident, and is out there ready to spend,"
Macy's CEO Jeff Gennette said Wednesday.
He added that tax cuts are benefitting both consumers and
companies. "We've been able to go faster with our initiatives based
on the corporate tax cut," he said.
Penney struggled from continued weakness in its women's and
children's apparel offerings and supply-chain problems that forced
it to liquidate some holiday goods. But it said it continued to
pick up share in appliances as Sears Holdings Corp. closed
stores.
Walmart, which is the largest seller of groceries in the U.S.
and earns around 56% of its $318.5 billion in annual U.S. sales
from food, is trying to capture online grocery sales as well as
Amazon moves rapidly to grow in the category.
On Thursday Walmart said it will offer home grocery delivery
from 800 stores by year's end, adding to around 2,100 stores that
let shoppers buy groceries online and pick up those orders in store
parking lots.
At the same time, Walmart continues to eat into profits with
investments to improve stores and grow online in the U.S. and
internationally. In the first quarter, Walmart posted a profit of
$2.13 billion, down from $3.04 billion last year.
This month Walmart agreed to take control of India's largest
e-commerce company, Flipkart Group, for $16 billion, betting that
growth in the South Asian market will make up for the short-term
losses from taking on the unprofitable startup.
It also recently sold control of U.K. chain Asda to J Sainsbury
PLC, and, according to people familiar with the matter, it is in
talks to sell a majority stake in its Brazilian operations.
Walmart reiterated Thursday that the Flipkart investment will
reduce full-year per-share earnings by 25 cents to 30 cents,
executives said last week. That will jump to 60 cents a share in
the next fiscal year to keep Flipkart sales growing, said the
company. The company previously said full-year per-share earnings
would hit between $4.75 and $5.00.
Write to Sarah Nassauer at sarah.nassauer@wsj.com and Suzanne
Kapner at Suzanne.Kapner@wsj.com
(END) Dow Jones Newswires
May 17, 2018 11:29 ET (15:29 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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