Are you a retail investor? Or are you just thinking about getting into retail investing? Either way, you’re going to want to hear today’s news. On Thursday, before the market opened, Wal-Mart Stores (NYSE:$WMT) posted second quarter earnings and sales that beat Wall Street expectations. What caused the increase? Analysts speculate it is because the Arkansas-based retailer made further gains in its online business.
It seems fresh digital initiatives and an increasing assortment of products on Walmart.com helped the company in boosting online transactions by 60%, Wal-Mart said. In the last quarter, e-commerce sales increased 63%, compared to a 29% growth in the prior quarter.
While the majority of retailers struggle to bring shoppers in, Wal-Mart seems to be the exception, reporting same-store sales growth at its U.S. locations for the 12th straight quarter, driven by traffic growth of 1.3%, the company said.
However, regardless of the news, Wal-Mart shares were down by more than 2.5% during pre-market trading.
Let’s take a look at what Wal-Mart reported for the second quarter versus what Wall Street was forecasting, based on analysts polled by Thomson Reuters.
- Earnings: $1.08 a share, adjusted, compared with a forecast of $1.07 per share
- Revenue: $123.36 billion versus an estimate of $122.84 billion
- Same-store sales for stores in the United States – not including fuel – increased 1.7%. This matched expectations.
“This isn’t a blow-away report… it’s a solid report,” Chuck Grom of Gordon Haskett told CNBC’s “Squawk Box.” Grom added that Wal-Mart’s stock has been a “big outperformer” lately, which has the potential to lead to a temporary sell-off, “even if the print is perfect.”
Further, during the second quarter, Wal-Mart saw its food categories experience their strongest quarterly comparable sales performance in five years, the retailer said. “One of the particular areas of success for Walmart is grocery,” Neil Saunders of GlobalData wrote.
Aside from the good news, Wal-Mart had it’s fair share of trouble in the second quarter. For instance, profit margins dropped marginally due to more aggressive promotions. In an attempt to defend market share from Amazon (NASDAQ:$AMZN), Wal-Mart has been investing large amounts to keep its prices competitive. Additionally, the company is bulking up its online operations.
“Our customers are responding to the improvements in stores and online, and our results reflect this,” CEO Doug McMillon said. “Traffic increases at store level and the eCommerce growth rate are key highlights.”
Moving forward, Wal-Mart boosted the low end of its earnings outlook for the full year, now expecting profit ranging between $4.30 to $4.40 per share, adjusted. Before today, Wal-Mart announced that it would be expecting to bring in $4.20 to $4.40 a share.
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