As rivals struggle, retailer has benefited from its investment in stores, e-commerce
By Sarah Nassauer and Anne Steele
Wal-Mart Stores Inc. reported stronger quarterly sales Thursday, showing the world's largest retailer is pulling in 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, led by its core Walmart.com site.
The company said it continued making investments to improve stores, lower prices and boost online shopping capabilities. However, profit continued to fall, 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 2.5% in early afternoon trading to $77.
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, including sales from Jet.com Inc. and other recent e-commerce acquisitions. Most of the sales increase came from Walmart.com, said a spokesman. Wal-Mart bought Jet.com in September for $3.3 billion and has since bought up smaller e-commerce sites such as Modcloth, Moosejaw and ShoeBuy. Chief Executive Doug McMillon said the purchases help add to Wal-Mart's assortment of 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, the company said. However, sales of those items 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 [email protected] and Anne Steele at [email protected]