Wal-Mart Sales Growth Freshens Retail Mood -- Update
November 16 2017 - 07:41AM
Dow Jones News
By Sarah Nassauer and Austen Hufford
Wal-Mart Stores Inc. posted its strongest quarterly U.S. sales
since 2009, boosted by a big jump in e-commerce and post-hurricane
demand, though profits slipped as the retail giant continued to
invest to improve stores and cut prices.
The results buck a string of mostly downbeat retail reports this
week, from big-box stores like Target Corp. to off-price operator
TJX Cos. as they battle a shift to online shopping and heavy
discounting. One exception, home-improvement retailer Home Depot
Inc., continued to log strong gains, boosted by hurricane recovery
sales.
Wal-Mart, which gets about half of its U.S. revenue from
groceries, said Thursday sales at existing stores excluding fuel
rose 2.7% in its latest quarter -- its 13th straight quarter of
gains and the fastest growth since the quarter ended May 2009. The
company highlighted its grocery business, saying that section
delivered the strongest quarterly same-store sales growth in more
than five years.
"We have momentum, and it's encouraging to see customers
responding to our store and ecommerce initiatives," CEO Doug
McMillon said in prepared remarks. Wal-Mart, which has acquired
online seller Jet.com and niche apparel sites like Bonobos and
ModCloth, said e-commerce sales in the U.S. jumped 50% from a year
ago.
The retailer also raised its adjusted profit outlook for the
year ending in January. Shares rose 4.6% in premarket trading.
The company also said it was close to settling a yearslong
foreign-bribery probe. The company said it would record a $283
million accrual charge related to the settlement as talks with the
Justice Department have "progressed."
Same-store sales at Wal-Mart's U.S. stores came in well above
the 1.8% growth analysts polled by Consensus Metrix were expecting.
Wal-Mart said results were boosted by more shoppers coming to
stores, higher ecommerce sales and the recent hurricanes. Traffic
rose 1.5%.
But the company's profit margin fell as it lowered prices to
compete and from continued growth in lower-margin e-commerce sales.
The hurricanes also cut into its margin.
In recent years, Wal-Mart has shifted its growth strategy from
building more cavernous supercenters to improving existing stores
and investing in e-commerce. In 2015 it closed more than 150 U.S.
stores. It plans to build just two dozen stores next fiscal year
and has vowed to cut more costs.
Wal-Mart executives say they will boost U.S. sales by bringing
more shoppers to existing locations and driving online sales.
Wal-Mart has raised starting wages for store employees, refurbished
stores and bought smaller online retailer startups.
But as more shoppers buy items online, often from Amazon.com
Inc., many traditional retailers have struggled to simultaneously
keep sales and profits growing as more invest to improve stores or
compete online. Wal-Mart recently started charging more for some
products on Walmart.com than in stores, in part to offset the cost
of home delivery and improve online profitability, The Wall Street
Journal reported earlier this week.
Target Wednesday said sales in existing stores rose 0.9%, but
profit plunged 21% as it spent to remodel stores and lower prices.
Many department store chains continued to struggle, including Sears
Holding Corp. and Macy's Inc.
On Tuesday TJX Cos., which operates TJ Maxx, Marshalls and
HomeGoods stores, reported lower same-store sales for the first
time since 2009, a rare miss for a company that has avoided many of
the problems weighing down the retail sector. Like many retailers
that reported weaker sales figures, TJX executives pointed to
hurricanes and warmer-than-expected weather for the sales
slump.
Retail industry organizations and consultants have largely
predicted strong holiday sales during the fourth quarter. However,
some analysts have painted a less rosy picture for traditional
retailers.
"We don't share in that same optimism," said Morgan Stanley
analyst Simeon Gutman in a recent research note. "Spending dollars
may be constrained by headwinds like higher gasoline prices and
basically a growing share among fewer retailers."
Amazon is expected to earn 43.5% of U.S. online sales this year,
up from 38.1% last year, according to eMarketer, a research firm.
Wal-Mart will grow to 3.6%, from 2.8% last year, said the firm.
Overall, Wal-Mart's quarterly revenue increased 4.2% to $123.18
billion.
The company's profit fell to $1.75 billion, or 58 cents a share,
compared with $3.03 billion, or 98 cents a share a year ago as it
took charges for paying down debt early and the bribery probe
settlement. On an adjusted basis, profit came in at $1 a share.
Analysts polled by Thomson Reuters had expected revenue of $121
billion and adjusted earnings per share of 97 cents.
Write to Sarah Nassauer at sarah.nassauer@wsj.com and Austen
Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
November 16, 2017 08:26 ET (13:26 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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