By Austen Hufford
Walmart Inc. said Thursday that stronger foot traffic and average customer spend per visit at its U.S. stores helped lift sales in its quarter, as the retail giant saw grocery growth and continued to invest in online initiatives.
Same-store sales at Walmart's U.S. stores rose 2.1%, compared with the 2.3% expected by analysts according to Consensus Metrix.
Walmart said its latest quarter was helped by its grocery business in the U.S., with growth in private brands driving increases in fresh foods and packaged goods, and by higher branded drug prices. The company said it was improving lighting, expanding deli offerings and making its bakeries easier to navigate. Still, cool weather in April weighed down sales for seasonal items and lawn-care-related products.
Walmart said it posted a 12th straight quarter of declining comparable inventory levels while maintaining enough stock in stores to serve customers. Reducing inventory levels can help boost profit margins.
By the end of the year, Walmart expects its grocery delivery service to be able to reach 40% of the U.S. population.
Recently the company closed 63 of its underperforming Sam's Club locations, or around 10%, and removed tobacco from certain locations. Getting rid of stores that were doing less well can boost results for the remaining locations. The closed locations cut revenue by 8% but comparable sales excluding fuel and tobacco of the remaining stores increased 5.2%, as foot traffic rose 5.6%.
Walmart has also been changing how it views growth from international markets. This month Walmart agreed to take control of India's largest e-commerce company, Flipkart Group, for $16 billion, betting that growth in the South Asian market will make up for the short-term losses from taking on the unprofitable startup.
It also recently sold control of U.K. chain Asda to J Sainsbury PLC, and, according to people familiar with the matter, it is in talks to sell a majority stake in its Brazilian operations. Walmart International generated about 24% of the company's sales for its most recently completed year.
U.S. e-commerce sales grew 33% in the first quarter, up from 23% in the fourth quarter. Walmart said it continues to expect 40% online growth this year. E-commerce sales still account for a fraction of the retailer's revenue.
In the first quarter, Walmart posted a profit of $2.13 billion, or 72 cents a share, compared with a profit of $3.04 billion, or $1 a share, in the same period a year before. On an adjusted basis, which excludes some changes in accounting rules, the company brought in $1.14 a share, above the $1.12 expected by analysts polled by Thomson Reuters.
Revenue rose 4.4% to $122.69 billion, coming in above the $120.51 billion expected by analysts.
Walmart said profit in the quarter was hurt by a fall in the share price of Chinese e-commerce company JD.com. Under new accounting rules, the company records gains and losses of certain equity investments, even if the company doesn't sell or buy shares.
Higher fuel and logistics costs also hurt results. A truck shortage this year has led to rising costs across industries in the U.S.
Shares rose 1.9% in premarket trading.
Write to Austen Hufford at [email protected]