Wal-Mart q2 earnings 2017

Earnings


Wal-Mart on Thursday reported second-quarter earnings and sales that topped Street expectations, as the big-box retailer continues to expand its online business.

Fresh digital initiatives and a growing assortment of products on Walmart.com aided the retailer in boosting online transactions by 60 percent, the company said. Last quarter, e-commerce sales climbed 63 percent, compared to 29 percent growth in the prior quarter.

Although many retailers are struggling to draw shoppers in, Wal-Mart posted same-store sales growth at its U.S. locations for the twelfth consecutive quarter, fueled by traffic growth of 1.3 percent, the company said.

Here’s what Wal-Mart reported compared to what Wall Street was expecting, based on a Thomson Reuters survey of analysts:

  • Earnings of $1.08 a share, adjusted, compared with a forecast profit of $1.07 per share.
  • Revenue was $123.36 billion versus an estimate of $122.84 billion.
  • Same-store sales for U.S. stores, excluding fuel, climbed 1.7 percent, matching expectations.

Despite the news, shares of Wal-Mart were last falling more than 2 percent during premarket trading.

“This isn’t a blow-away report … it’s a solid report,” Gordon Haskett analyst Chuck Grom told CNBC’s “Squawk Box” on Thursday. Wal-Mart’s stock has been a “big outperformer” of late, Grom added, which can lead to a temporary selloff sometimes, “even if the print is perfect.”

“I think this number needed to be a little bit better today to drive [Wal-Mart’s] stock higher,” he said.

One weakness for Wal-Mart this quarter was that profit margins fell slightly due to heavier promotions. The retailer has been investing heavily to keep its prices competitive in order to defend its market share from Amazon and other rivals. It also is investing heavily in bulking up its online operations. These moves are yielding results.

“Our customers are responding to the improvements in stores and online, and our results reflect this,” CEO Doug McMillon said in a statement. “Traffic increases at store level and the eCommerce growth rate are key highlights.”

The Bentonville, Arkansas-based retailer said it earned 96 cents per share during the period. Excluding one-time charges, the company earned $1.08 a share.

Wal-Mart’s total sales climbed 2.1 percent from a year ago, to $123.36 billion. This consisted of 3.3 percent sales growth at Wal-Mart U.S. stores, a 1 percent decline in revenues for Wal-Mart’s international business, and 2.3 percent growth across Sam’s Club.

Wal-Mart’s U.S. comparable sales — a metric closely watched by the Street for retailers — increased 1.8 percent, including fuel. Excluding gasoline sales, comps in the U.S. were up 1.7 percent, which consisted of growth of 1.2 percent at Sam’s Club, and an increase of 1.8 percent at Wal-Mart stores.

“It was another solid quarter … we are pleased with the first half of the year,” CFO Brett Biggs told CNBC Thursday morning. “I think one of the things I’m most excited about is that we continued to bring together what we are doing in the stores with what we are doing online.”

Looking ahead, Wal-Mart raised the low end of its earnings outlook for the full year, now forecasting profit between $4.30 and $4.40 per share, adjusted. Previously, Wal-Mart had said it expected to earn between $4.20 and $4.40 a share. A survey of analysts by Thomson Reuters was calling for earnings per share of $4.37.

Same-store sales, excluding fuel, are expected to climb 1.5 to 2 percent at Wal-Mart U.S. locations in the third quarter of 2017.

In a competitive retail environment, big-box retailer Wal-Mart has been defending its turf against internet giant Amazon, making moves into the digital world. Wal-Mart is also reportedly growing its online advertising business.

Some of Wal-Mart’s latest efforts to get purchases more quickly and efficiently to customers include testing an employee delivery program. The retailer is also piloting a push in its same-day service in certain markets, while retail rival Target just landed a partnership to do the same.

“Explosive online growth is continuing its post-Jet.com trend, and we expect this level of performance to continue, along with Walmart’s ongoing efforts to leverage Jet by making tactical pure-play online acquisitions similar to the recent Bonobos deal, and therefore put itself in the solid number 2 position behind Amazon in most online categories,” said Charlie O’Shea, Moody’s lead retail analyst. “As Walmart is a key player across most back-to-school/back-to-college product categories, and we are in the heart of those seasons, we would expect further promotional activity in Q3, with smaller retailers to feel increased levels of stress as Walmart and Amazon continue their battle over market share.”

In its fiscal first quarter, Wal-Mart said its grocery business continued to improve across U.S. stores. CFO Biggs told CNBC on Thursday that the retailer is pleased with what it’s been doing in the food business, and “online grocery continues to grow rapidly.”

During the second quarter, food categories saw their strongest quarterly comparable sales performance in five years, Wal-Mart said.

The retailer completed remodels of 283 stores globally in the second quarter, and expanded its online grocery service to include more than 900 locations in the U.S. alone.

Retail rival Target on Wednesday reported better-than-expected digital sales growth, as it saw more shoppers returning to its stores and online for “quick trips” — ringing up smaller purchases, but more frequently.

As of Wednesday’s market close, shares of Wal-Mart have climbed about 11 percent over the past 12 months. This far outpaces the S&P 500 Retail ETF’s (XRT) declines of about 15 percent over the same period.



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