Wal-Mart Draws Shoppers, Bucks the Retail Slump -- 2nd Update

By Sarah Nassauer and Anne Steele Features Dow Jones Newswires

Wal-Mart Stores Inc. reported stronger quarterly sales Thursday, showing that the world's largest retailer is drawing shoppers at a time when many competitors are reeling in the era of Amazon.com Inc.

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Wal-Mart's U.S. same-store sales rose 1.4% for the fiscal first quarter -- the 11th straight quarterly increase -- due to a 1.5% rise in foot traffic, thanks in part to improvements Wal-Mart has made in its stores. However, profit fell 1.3% in the quarter, as the retailer continued making investments to compete with online retailers and discounters by lowering prices, raising wages and expanding e-commerce services.

Shares in the company added 0.8% premarket to $75.75.

The company's stable sales are a marked contrast with many department-store retailers and competitors including Target Corp., which reported lower sales Wednesday.

Wal-Mart also reported higher sales over the winter holiday season. But those gains are being supported by heavy investments, including buying up e-commerce companies, expanded online inventory and investments to speed up shipping times.

During the first quarter, U.S. e-commerce sales surged 63%, boosted by the purchases of online retailer Jet.com in September and smaller e-commerce sites ModCloth, Moosejaw and ShoeBuy earlier this year. Global e-commerce sales rose 7% from a year ago.

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"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 Wal-Mart Chief Executive Doug McMillon.

In all for the April period, Wal-Mart earned $3.04 billion, or $1.00 a share, compared with $3.08 billion, or 98 cents a share, a year ago.

Revenue increased 1.4% to $117.54 billion. Excluding currency headwinds the company said revenue would have climbed to $118.8 billion. Analysts, polled by Thomson Reuters, were looking for earnings of 96 cents a share on $117.74 billion in revenue.

Wal-Mart said operating, selling, general and administrative expenses grew 2.2% during the quarter. Its cost of sales rose 1.3%.

For the current quarter, the company guided for earnings of $1.00 to $1.08 a share, including a 5-cent tax benefit from the sale of the company's apparel format in Mexico. Analysts, on average, are looking for Wal-Mart to earn $1.07 a share.

"The first quarter was a solid quarter for Wal-Mart on multiple fronts as margins held steady despite the myriad ongoing investments in people, technology and price," said Moody's analyst Charlie O'Shea.

Write to Sarah Nassauer at sarah.nassauer@wsj.com and Anne Steele at Anne.Steele@wsj.com

Wal-Mart Stores Inc. reported stronger quarterly sales Thursday, showing that the world's largest retailer is drawing shoppers at a time when many competitors are reeling in the era of Amazon.com Inc.

Wal-Mart's U.S. same-store sales rose 1.4% in the first quarter -- the 11th straight quarterly increase -- as the retailer benefited from an increase in store foot traffic. The retailer also reported a surge in e-commerce sales, boosted by recent acquisitions.

The company said it continued making investments to improve stores, lower prices and boost online shopping capabilities. However, profit continued to fall in the wake of those investments, down 1.3% for the quarter.

In the U.S., which accounts for two-thirds of Wal-Mart's sales, foot traffic rose 1.5% in the quarter ended April 30. That rise was supported in part by strong sales of groceries and household goods. Wal-Mart has been lowering some prices in those categories, in part, to compete with a rising crop of discount grocers including Lidl and Aldi.

The average amount each U.S. shopper spent per trip declined slightly, down 0.1% "primarily due to lower sales of higher ticket items at the beginning of the quarter, as well as continued price investment," said Wal-Mart chief financial officer Brett Biggs in a conference call. Overall, U.S. sales in the first part of the quarter suffered because of a delay in federal tax refund checks, executives said.

Shares in the company added 2.4% in late morning trading to $76.89.

The company's stable sales are a marked contrast with many department store retailers and competitors including Target Corp, which said on Wednesday that sales at stores open at least a year fell 1.3% in the first quarter. U.S. retailers are closing stores at a record pace this year in the face of online competition and overbuilding. Many others have filed for bankruptcy protection, including teen retailer Rue21, Hhgregg Inc. and Limited Stores Co.

Meanwhile, Wal-Mart has leaned heavily into its online efforts and improved stores to compete. Over the last two years it raised store employee wages and shrunk inventory to smooth store operations. Inventory levels in existing stores fell 7.3% in the quarter.

U.S. e-commerce sales surged 63% in the first quarter, "primarily driven by organic growth," said Marc Lore, the company's U.S. e-commerce chief, on a call with reporters. The quarter also included sales from its purchase of online retailer Jet.com in September as well as smaller e-commerce sites Modcloth, Moosejaw and ShoeBuy earlier this year. Global e-commerce sales rose 7% from a year ago. Mr. McMillon said the purchases help add assortment to Wal-Mart's online products, but the company won't "buy our way to success."

Though grocery sales rose, shoppers bought fewer general merchandise items in the beginning of the quarter like apparel and bikes, said the company, though those sales strengthened as the quarter progressed.

In all for the April period, Wal-Mart earned $3.04 billion, or $1 a share, compared with $3.08 billion, or 98 cents a share, a year ago, the first quarterly earnings-per-share increase in more than two years. Revenue increased 1.4% to $117.54 billion.

Wal-Mart said operating, selling, general and administrative expenses rose 2.2% during the quarter, mainly due to e-commerce and technology investments.

"The first quarter was a solid quarter for Wal-Mart on multiple fronts as margins held steady despite the myriad ongoing investments in people, technology and price," said Moody's analyst Charlie O'Shea.

Write to Sarah Nassauer at sarah.nassauer@wsj.com and Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

May 18, 2017 11:49 ET (15:49 GMT)