Wal-Mart's online sales, customer visits rise; shares hit 52-week high

May 18, 2017 09:38 AM

Wal-Mart Stores Inc on Thursday reported higher-than-expected quarterly sales at established U.S. stores, as a huge investment to bring more customers into the discount retailer paid off and a bigger push into e-commerce boosted online purchases, sending its shares to a 52-week high.

Wal-Mart and analysts said the company is benefiting from a $2.7 billion investment to increase entry-level wages and enhance the training of its workforce, which has led to better-stocked shelves and cleaner stores. It said store visits rose 1.5 %, the tenth consecutive quarterly increase.

"Wal-Mart's long string of investments in labor and e-commerce, including acquisitions, are enabling modest market share gains," John Zolidis, director equity research with the Buckingham Research Group said. 

Cowen & Co's senior research analyst Oliver Chen said "Wal-Mart's commitment to value pricing is driving traffic and growth in grocery and aggressive online strides are impacting comparable sales."

Shares of Wal-Mart rose to $77.40 - a 52-week high. As of Wednesday's close, the stock had risen 8.7 % so far this year. 

Wal-Mart's performance, along with rival Target Corp's results on Wednesday, bucked a string of weak results by department store retailers like Macy's Inc. On Wednesday, Target reported higher-than-expected quarterly earnings and sales and set an optimistic tone for the year.

Wal-Mart said sales at U.S. stores open at least a year rose 1.4 %, excluding fuel price fluctuations, and was the 11th consecutive quarterly increase. Analysts were expecting a 1.3 % increase, according to Consensus Metrix.

Wal-Mart has been aggressively investing in making its prices more competitive compared to rivals. It is carrying out price tests in 11 states and has asked vendors to offer grocery prices that are 15 % lower than competitors.

Wal-Mart's U.S. Chief Executive Greg Foran said comparable sales in food and grocery improved during the quarter, without sharing details. Grocery accounts for nearly 53 % of overall revenue for the retailer.

Internet sales accelerate
Online sales rose 63 % in the first quarter, which was higher than 29 % growth in the fourth quarter. The company said most of the growth was from its existing online operations rather than from acquisitions. Online sales added 0.8 percentage points to the first quarter comparable sales gain.

U.S. e-commerce chief Marc Lore told reporters online sales growth was boosted by the decision to offer free two-day shipping without membership fees and higher repeat orders.

Under Chief Executive Officer Doug McMillon and Lore, Wal-Mart has been trying to catch up to online rival Amazon.com Inc. In October, the company said it would slow the pace of new store openings to focus on expanding its e-commerce business.

To accelerate its e-commerce business, Wal-Mart has been acquiring small online retail startups. It has acquired three companies so far this year and is currently in talks with small online clothing retailer Bonobos. 

"We need to scale our e-commerce business further and see some additional strength in our store comps to deliver the results we know we're capable of," said McMillon.

Earnings per share were $1 for the quarter ended on April 30, exceeding the analysts' average estimate of 96 cents, according to Thomson Reuters I/B/E/S. Consolidated net income fell to $3.04 billion from $3.08 billion due to a higher tax rate.

Quarterly revenue rose 1.4 % to $117.5 billion, slightly lower than analysts expectations of $117.7 billion due to a stronger dollar, which reduces the value of overseas sales. Revenue grew 2.8 % on a currency neutral basis. 

For the second quarter, Wal-Mart said it expected an increase of 1.5 % to 2 % in U.S. same-store sales. It forecast earnings per share of $1 to $1.08, against market expectations of $1.07.

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Nandita Bose, Reuters