Wal-Mart's Sales Defy the Retail Slump -- 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% in the first quarter, the 11th straight quarterly increase, as more shoppers came to stores and e-commerce sales surged.

The retailer had 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 rose 2.9% in morning trading to $77.26.

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.

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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.

"The acquisitions have received a lot of attention but our plan in e-commerce is not to buy our way to success. The majority of our growth is and will be organic," said Wal-Mart chief executive Doug McMillon in a conference call.

"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 Mr. McMillon. Sales in the first part of the quarter were slow, in part because of a delay in the disbursement of federal tax refund checks, but strengthened later in the quarter, he said.

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. 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

(END) Dow Jones Newswires

May 18, 2017 09:52 ET (13:52 GMT)