Wal-Mart Back At May 2015 Levels After Mixed Q1

Wal-Mart Stores Inc.'s profits declined 1.3 percent during the first quarter of its fiscal year, but an e-commerce surge and strong sales across its USA stores showed the company continues to attract shoppers during a challenging time for other retailers.

Walmart U.S. comp sales increased 1.4 percent during the period, driven by a traffic increase of 1.5 percent, according to the company.

Wal-Mart has been trying to catch up to online rival Amazon.com and in October, the company said it would slow the pace of new store openings to focus on expanding its e-commerce business.

Quarterly revenue rose 1.4% to $117.5 billion, slightly lower than analysts expectations of $117.7 billion due to a stronger dollar, which reduces the value of overseas sales.

President and CEO Doug McMillon said, "We delivered a solid first quarter and we're encouraged by the start to the year". Wal-Mart's shares added $1.70 to $76.82.

"All of a sudden, Wal-Mart is the primary competitor to Amazon, as opposed to a fragmented cluster of people", said Greg Portell, a partner at consulting firm A.T. Kearney. The plan, said McMillon was gaining traction.

Walmart has been fighting fire with fire, so to speak, allocating $2 billion two years ago to grow its online presence.

And while investors were disappointed when last year's first quarter report showed only 7% e-commerce growth despite increased investments, online sales have surged in more recent quarters. Last quarter, online sales in the US grew 63%, while the volume of merchandise sold online was up 69%. While the US comp increase of 1.4% was about as expected, traffic growth of 1.5% (which accelerated on a two and three year basis) and e-commerce growth (an 80 bps contribution) surprised to the upside.

Even though other retailers have struggled to compete with Amazon, Wal-Mart has increased online sales by 63 percent in the first quarter which was much higher than the 29 percent growth in the fourth quarter and 20 percent in the third.

Noting Walmart's first period of EPS growth in more than two years, Ray Young, of New York-based Gordon Haskett Research Advisors, lauded the company's "exceptional results on a standalone basis", which he attributed to expanding digital sales, accelerating traffic and abating deflation, all of which are giving Walmart "momentum in its US businesses".

The counter witnessed a trading volume of 0.29 million shares versus an average volume of 0.77 million shares during last trading session. Most recently, it launched a program that offers a discount to items that are ordered online but picked up in the store.

The worldwide business division reported net sales of $27.1 billion in the first quarter, a decrease of 3.5 percent. "As a company, we're moving with speed and executing against the strategy we've outlined".

That was fueled by customer traffic increase of 1.5 percent.

Revenue was $117.54 billion, just shy of the $117.63 billion analysts had expected. Additionally, Wal-Mart also reported positive comparable growth in groceries, due in part to a lack of market deflation in food, excluding price investments. Analysts forecast adjusted earnings per share of $1.07.

Shares of Wal-Mart were last seen up 1.6% at $78.75 on Friday, with a consensus analyst price target of $77.49 and a 52-week trading range of $65.28 to $78.90.

  • Zachary Reyes