Walmart delivers in first quarter; online sales skyrocket
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.”
Teen retailer posts mixed Q1 results
American Eagle Outfitters’ profit shrunk in the first quarter amid charges and discounting.
Net income totaled $25.2 million, or 14 cents per share, compared to $40.4 million, or 22 cents per share, in the year-ago period. The retailer reported charges of $5.4 million related to severance and related charges due to corporate restructuring and its previously announced initiative to explore the closure or conversion of company owned and operated stores in Hong Kong, China, and the United Kingdom to licensed partnerships. American Eagle’s adjusted EPS was $0.16, which narrowly missed estimates.
Total revenue in the quarter, ended April 29, edged up 2% to a better-than-expected $762 million. Same-store sales rose 2% amid strong demand for its Aerie brand.
"The first quarter results reflected mall traffic headwinds, especially early in the quarter, with improved trends over Easter and a strong digital business throughout,” said CEO Jay Schottenstein. “As we look ahead, we are taking the right steps to improve our results and adjust our business for today’s rapidly evolving retail environment. We are creating efficiencies across our organization, as we aim to continue capitalizing on the strength of our brands, product leadership and other competitive advantages. The six million shares repurchased this quarter reflects the company’s strong cash flow, healthy balance sheet and confidence in our brands and long-term strategic initiatives."
In fiscal 2017, American Eagle plans to open 35 American Eagle Outfitters and Aerie stores throughout the U.S., Canada and Mexico. It plans to close between 25 and 40 store locations.
Ralph Lauren taps veteran P&G exec as its new CEO
Ralph Lauren Corp. has named a 25-year Proctor & Gamble executive to head up its ongoing turnaround effort.
The company appointed Patrice Louvet as president and CEO, effective July 17, 2017. At the time, he will also be appointed to the board. Louvet will dual report to founder Ralph Lauren in his capacity as executive chairman and to the company’s board.
Since February 2015, Louvet has served as P&G’s group president, global beauty, a division of 12 brands with approximately $11.5 billion in revenues in 2016. Prior to that, he was group president, global grooming (Gillette). He also previously served as president of P&G’s global prestige business where he oversaw a diverse portfolio of 23 fashion brands, including Gucci and Hugo Boss.
Ralph Lauren in February announced that president and chief executive Stefan Larsson would be leaving the company, reportedly over differences with Ralph over the direction of the company. Larsson, a former Gap and H&M executive, was challenged with overhauling the ailing Ralph Lauren empire. He worked to streamline the business, closing unprofitable stores and moving it to more of a faster business and design model.
“Finding the right partner to work with me to take us forward in our evolution has been my primary focus over the last several months and I am thrilled that Patrice is joining our talented team,’ Lauren said. He’s an enormously skilled business leader with a deep passion for the consumer and a sophisticated understanding of building global brands. This, combined with his collaborative working style, transformation experience and intense focus on results, will put us in a stronger position as we move toward the future.”