Walmart showed its muscle in the first quarter, reporting a big jump in online sales, an increase in traffic at its U.S. stores, and earnings that beat the Street.
The chain’s U.S. same-store sales grew for the 11th consecutive quarter, rising 1.4% in the period ended April 30, just beating analysts’ estimates. Online sales surged 63%, compared to 29% growth in the last quarter. Total revenue increased 1.4%, to $117.54 billion, slightly short of the $117.74 billion forecast by analysts, mostly due to the impact of a stronger dollar overseas.
“The overall net revenue gain of 1.4% may not sound stellar, but for a company of the size of Walmart, this is a significant uplift in dollar terms,” commented Neil Saunders, managing director of GlobalData Retail. “At Walmart U.S., the 2.9% increase in net sales equates to an additional $2.1 billion taken over the first quarter -- an impressive achievement given 2016 included an extra day of trading from the leap year. From an already high base, Walmart is now winning market share across many categories." (Click here to read more of his comments.)
The retailer reported earnings per share of $1 in quarter, exceeding average estimates of 96 cents. Consolidated net income fell to $3.04 billion from $3.08 billion due to an increase a higher tax rate.
“We delivered a solid first quarter and we're encouraged by the start to the year," stated Doug McMillon, CEO, Walmart. "We're moving faster to combine our digital and physical assets to make shopping simple and easy for customers. Our plan is gaining traction."
Walmart said it now expects to earn between $1 and $1.08 per share during its second quarter, excluding a net benefit from the sale of Suburbia, the chain’s apparel unit in Mexico. U.S. same-store sales are expected to rise between 1.5- and 2%.
Walmart has been investing heavily in its digital operations. Under the direction of digital chief Marc Lore, the discounter has been improving its own online experience and also acquiring specialty online retailers. It also has been lower shipping prices. Most recently, it launched a program that offers a discount to items that are ordered online but picked up in the store.
“Walmart's e-commerce business is in the ascendancy,” added Saunders. “Positive changes to free shipping requirements and the addition of millions of more products to the online store have both resulted in steady uplifts in customer numbers. We are particularly pleased that Walmart is using discounting to encourage online shoppers to use more economical store pickup rather than delivery. We see the effective use of its real estate assets as one of Walmart's major strengths over Amazon.”