Walmart Continues Run of Sales Growth, Raises Forecasts--4th Update
August 15 2019 - 10:26AM
Dow Jones News
By Sarah Nassauer
Walmart Inc. said sales rose in the second quarter and it raised
its profit forecasts for the year, extending the retail giant's
multiyear streak of growth as it takes market share from struggling
competitors and expands online.
Sales at U.S. stores and websites operating at least 12 months
grew 2.8%, due to strong grocery sales, online and off, and
slightly more shoppers visiting stores and websites. U.S.
e-commerce sales rose 37%.
"We're gaining market share. We're on track to exceed our
original earnings expectations for the year," said Walmart CEO Doug
McMillon Thursday in a release.
Walmart now expects U.S.comparable sales to rise at the upper
end of a 2.5% to 3% range for the full year, an improvement from an
earlier prediction of sales falling somewhere in that range.
Walmart shares rose more than 5% in early trading.
Walmart increased its profit target for the year, saying that
full-year earnings per share will come in at a "slight decrease to
slight increase" compared with last year. Last fiscal year Walmart
reported adjusted earnings per share of $4.91. Previously, Walmart
said earnings per share would decline this year.
The solid sales and earnings upgrade from Walmart contrasts with
general nervousness in the stock market over the strength of the
economy and weak sales at some other retailers. On Wednesday,
Macy's Inc. lowered its full-year earnings outlook, saying sales
during the quarter didn't meet expectations amid worries over
tariff-related cost increases, sending its shares down 13%. And on
Thursday J.C. Penney Co. reported a 9% drop in sales.
"Other results from the sector need to be viewed against this
context: At present there is just no evidence of a material
downturn," said Neil Saunders, managing director of GlobalData
Retail. "Performance remains largely the responsibility of the
strategies of individual retailers."
National data released Thursday also eased concerns of a broader
slowdown, with retail sales rising a seasonally adjusted 0.7% in
July from a month earlier, well above economists' expectations, the
Commerce Department said.
Several retailers including Target Corp., Home Depot Inc. and
Lowe's Co. Inc. are scheduled to report earnings next week,
providing a clearer picture of the broader health of the
sector.
In recent years, Walmart has invested heavily to grow online and
add more digital capability to stores such as services that allow
shoppers to buy groceries online and pick up in store parking lots.
It is also using more automation in stores to offset labor costs to
spend elsewhere, such as faster online shipping and e-commerce
tests such as Jetblack, a New York service that offers members
paying $600 a year text-based buying and same-day shipping. U.S.
stores are Walmart's primary sales and profit driver, while its
U.S. e-commerce business remains unprofitable.
Retail chains have expressed concerns about the impact of the
U.S.'s escalating trade war with China ahead of the holiday
shopping season. On Tuesday, the Trump administration suspended
plans to impose new tariffs on about $156 billion in goods from
China until Dec. 15. The suspension affected tariffs planned on
items including toys, cellphones and laptop computers that had been
set to take effect Sept. 1. Tariffs on about $13.7 billion of
fabrics and apparel were postponed until the end of the year, but
tariffs will still move forward on about $39 billion of such
items.
Walmart CFO Brett Biggs said Thursday Walmart has factored the
suspension of tariffs into its full-year guidance, without breaking
down details.
September tariffs will still hit "apparel and TVs, which are
decent size categories for us," said Mr. Biggs in an interview. But
the delay "makes it a little more manageable," he said.
Also on Thursday, Mr. McMillon gave for the first time more
details on the company's gun sales in the wake of a shooting at an
El Paso, Texas, Walmart earlier this month that killed 22 and
sparked new calls from some corporate employees and gun-control
activists for the chain to stop selling firearms.
Walmart sells about 2% of the nation's firearms and 20% of the
ammunition, said Mr. McMillon in a statement, "which we believe
places us outside at least the top three sellers in the
industry."
Mr. McMillon reiterated a previous statement that the nation's
largest retailer and private employer is thinking through broader
issues related to gun violence. "We will strive to use these
experiences to identify additional actions we can take to
strengthen our processes, improve our technology and create an even
safer environment in our stores."
He said Walmart supports strengthening background checks for gun
purchases and believes the reauthorization of the assault-weapons
ban "should be debated to determine its effectiveness."
Write to Sarah Nassauer at sarah.nassauer@wsj.com
(END) Dow Jones Newswires
August 15, 2019 10:11 ET (14:11 GMT)
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