Wal-Mart raises annual profit, tops forecasts
BENTONVILLE, Ark. - Wal-Mart (WMT) raised its earnings outlook for the year and delivered strong profit and sales in the second quarter after the world’s largest retailer revamped its stores, improved the shopping experience, and won back customers.
“Our strategy in the U.S. is working,” said CEO Doug McMillon.
Shares jumped 4 percent in early trading.
Wal-Mart is fighting off competition on multiple fronts, from Amazon.com and dollar stores, to grocers like Kroger, which are ramping up promotions and lowering prices.
Wal-Mart has responded with changes at stores, and online, to stay competitive in a vastly altered landscape. It’s spending $2.7 billion on higher wages and other investments for its hourly workers over a two-year period. The company also just rolled out a new system in about 650 Neighborhood Market stores that gives hourly workers more certainty about their schedules. The system could be eventually launched to all 4,600 U.S. Wal-Mart stores. Wal-Mart says lifting wages means happier workers who will better serve their customers.
And it’s sharpening its attack against Amazon. Earlier this month, it announced the $3 billion acquisition of the fast-growing online retailer Jet.com. Wal-Mart says that with the deal it will be able to grab a higher-income customer who typically is younger than its own shoppers. Wal-Mart says it will incorporate some of Jet.com’s technology that lowers prices in real time by looking for ways to cut costs.
Wal-Mart has also trimmed its free-shipping pilot program ShipingPass to two-day delivery from three and cut a dollar off the membership to $49 a year in an attempt to answer Amazon’s Prime program. But while Amazon.com’s Prime membership costs $99 a year, it comes with a lot of perks like streaming music and video and household subscriptions.
The Jet.com deal comes as Wal-Mart’s online business slows despite substantial investments. Global online sales rose 11.8 percent in the second quarter, an acceleration from the 7 percent pace it saw in the first quarter. But that’s still weaker than the 20 percent increases from less than two years ago.
Second-quarter net income jumped nearly 9 percent to $3.77 billion, for $1.21 per share, in the quarter ended July 31. That compares with $3.47 billion, or $1.08 per share in the year-ago quarter.
Earnings, adjusted for non-recurring gains, were $1.07 per share, a nickel better than Wall Street had expected, according to a survey by Zacks Investment Research.
Revenue was $120.85 billion, also edging out analyst forecasts.
Revenue at U.S. Walmart stores opened at least a year rose 1.6 percent, its best performance since 2008. It was also the eighth straight quarterly gain for comparable-store sales. The U.S. Walmart division accounts for 62 percent of total sales.
The company now estimates that for the current fiscal year adjust earnings per share will be $4.15 per share to $4.35 per share. Analysts had expected $4.27 per share.