Digital and store sales boost Walmart in Q2
Walmart reported better-than-expected results for its second quarter amid surging online sales and an increase in store traffic.
Walmart's total revenue for the period ended July 31 rose 2.3% to $123.36 billion for the quarter, better than analysts had expected. U.S. store visits increased 1.3% over the year-ago period.
Same-store sales for U.S. stores, excluding fuel, rose 1.7%. It was the discounter's 12th consecutive quarter of comparable sales gains. Sales rose 1.2% at Sam's Club, and 1.8% at Walmart.
Online transactions surged 60%, boosted by new digital initiatives, including the acquisition of e-commerce players like Moosejaw and Modcloth, and an expanded assortment of merchandise.
"Sales growth is coming from across the business – including stores, e-commerce and a combination of both," said CEO Doug McMillon in a statement.
A particularly bright spot for Walmart was food, which had its best same-store sales quarter in five years. The performance bodes well for the chain which is more than holding its own in the midst of brutal competition from the likes of Aldi, newcomer Lidl and Amazon.
Neil Saunders, managing director of GlobalData Retail, said that Walmart's continued investment in everyday low prices is helping to drive its success in grocery.
"As the grocery sector enters one of its toughest phases, we believe that Walmart is well positioned to make further gains," Saunders said. "It is one of the few firms that have the firepower to cope with the push towards compressed prices and margins."
Walmart has been investing heavily in its online operations and in price promotions. Those efforts took a toll on the chain's margins and net income.
"We note the decline in net income, but believe that some short term erosion is necessary as the business invests in its future," Saunders commented. (For more of his commentary, click here.)
Net income fell 23% to $2.9 billion, or 96 per cents per share, from $3.7 billion, or $1.21 per share, in the year-ago period, at least partly due to a loss from repurchasing debt after a bond tender offer.
Excluding special items, the discounter reported adjusted earnings per share of $1.08 a share, topping analysts' estimates of $1.07 per share.
Gross margins were down 11 basis points to 25%, including a five-basis-point decline in the United States. Operating margins fell to 4.9% from 5.1%, and U.S. operating expenses rose 3.9%.
"Strategic price investments in key markets and the growing mix of our e-commerce business reduced the gross margin rate," Walmart CFO Brett Biggs said in a statement.
Walmart raised the low end of its earnings outlook for the full year, now forecasting profit ranging from $4.30 to $4.40 per share, adjusted. Previously, the retailer said it expected to earn $4.20 to $4.40 a share. Analysts were calling for earnings per share of $4.37.
what was left out of the article was this. They burned through over 100 pct of cash on hand in the first 6 months. combined they went through 7.5 BILLION in dividends and stock buybacks. 4 billion in buybacks , the rest in dividens. HMm so tell me is this how you non GAAP cook the books people and selectively leave out the most important part of info from the articles? yea, thought so
Profit and same-store sales slide at Urban Outfitters
Urban Outfitters' profit and sales fell in the second quarter even as it topped Wall Street expectations.
Urban Outfitters said it earned $49.91 million, or 44 cents a share, in the quarter, down from $76.91 million, or 66 cents a share, in the year-ago period, as the retailer Analysts had expected the company to earn $0.37 per share, amid heavy discounting.
Total net sales fell 2% to $873 million, from $891 million a year ago. Analysts had expected sales of $862 million.
"While Wall Street cheers Urban Outfitters for not doing quite so badly as forecast, the reality is that this is a lousy set of results," commented Anthony Riva, analyst at GlobalData Retail. "Not only are the numbers sequentially worse than a pretty dire first quarter, but they also show that many of the initiatives put into play remain a long way from delivering."
Comparable retail segment net sales, which includes the direct to consumer segment, fell 4.9%, the worst drop in seven years according to Bloomberg. The company attributed to "negative retail store sales," offset in part by continued sales growth in direct-to-consumer sales.
Same-store sales fell 4% at Anthropologie and 7.9% at Urban Outfitters. A bright spot was Free People, where same-store sales increased 2.0%.
"The blunt truth is that both Urban Outfitters and Anthropologie are firmly off pitch, especially when it comes to apparel," Riva said. "Bluntly put, their collections are decidedly odd and all too frequently look like an art installation rather than saleable merchandise. As much as this wins some fans, it also deters and confuses many more mainstream shoppers." (For more, click here.)
Urban Outfitters CEO Richard Haynes stated that while the chain was disappointed in its second quarter performance, it has a number of initiatives underway. These include speed to customer, international growth, wholesale expansion and digital investments.
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Analyst: Urban Outfitters, Anthropologie off pitch when it comes to apparel
While Wall Street cheers Urban Outfitters for not doing quite so badly as forecast, the reality is that this is a lousy set of results. Not only are the numbers sequentially worse than a pretty dire first quarter, but they also show that many of the initiatives put into play remain a long way from delivering.
The overall sales decline of 2% is poor, although the number would have been materially worse if it wasn't for a relatively strong wholesale performance where revenues increased by 10%. Outside of this area of advancement, the rest of the group is in a tailspin.
Retail sales were down by a sharp 3.1% on a total basis and by an even worse 5% in comparable terms. Behind this is a dramatic same-store fall of 7.9% at the Urban Outfitters brand, and a 4.0% dip at Anthropologie. Only Free People managed to generate growth, but the 2.9% uplift proved wholly insufficient to offset the declines in the larger parts of Urban's business.
If the sales drops weren't bad enough, they were accompanied by a deterioration of 440 basis points in gross profit. This was mostly thanks to far higher markdown activity, which was necessary to clear down inventory that would not sell at full price. The impact on the bottom line, which was also affected by higher logistics and delivery charges, was a 35.1% tumble in net income.
Urban management has often spoken of the challenges in physical retail and the difficulties associated with growing store sales. We believe there is some truth in this assertion and are the first to recognize that some of the company's stores are exposed to locations where footfall has been soft. However, we also believe that the excuse is a distraction from some of the real issues at the company which, in our view, are mostly around the products.
The blunt truth is that both Urban Outfitters and Anthropologie are firmly off pitch, especially when it comes to apparel. Bluntly put, their collections are decidedly odd and all too frequently look like an art installation rather than saleable merchandise. As much as this wins some fans, it also deters and confuses many more mainstream shoppers. Admittedly there are some good pieces and lines within the jumbled assortment, but finding them is difficult and too much effort for all but the most committed consumers.
This is one of the reasons that online has performed so much better than stores. Certainly, the general direction of travel in retail is more supportive of digital growth, but we also believe sorting and sifting through the Urban range online to find acceptable items is far easier than in stores.
Given that apparel is the mainstay of the offer, an ill-defined and mistargeted collection is extremely unhelpful for all of the other things Urban Outfitters and Anthropologie sell. Both brands market themselves as lifestyle destinations, but when the overall brand image is unclear, it is harder to create traction across the whole product mix. Fortunately, some embryonic categories like home remain in growth simply because of their immaturity, but we believe they are falling a long way short of potential.
Looking ahead, Urban has promised more discipline and focus on ranges. We can see some early signs of this in the latest collections, but we think there is a long way to go before they are on track and winning back shoppers.
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