Wal-Mart Stores Inc. (WMT, Financial) reported its second-quarter results on Aug. 17, beating estimates.
U.S. comps grew 1.8%, marking the 12th straight quarter of postitive comp sales growth. The impressive results were attributed to the robust growth seen in brick-and-mortar and online sales. In addition, the food segment witnessed the strongest comps in five years.
Online net sales were the highlight of the quarter, up 60% from the prior-year quarter. Moreover, the company’s e-commerce merchandise volume surged 67%. Overall, Walmart management is pleased with its first-half performance and is looking to deliver better results in the second half of the year.
By the numbers
Walmart reported adjusted earnings per share of $1.08, beating analyst estimates of $1.07. The world’s largest retailer also raised its full-year adjusted EPS guidance to between $4.30 and $4.40 per share. The previous projections ranged from $4.20 to $4.30 per share.
Net income for the quarter dropped 23% to $2.9 billion, or 96 cents a share, compared with $3.7 billion, or $1.21 per share, in the comparable year-ago quarter. The company posted stronger-than-expected revenues of $123.36 billion, beating estimates of $122.84 billion. This includes a 3.3% sales growth in the U.S. stores, a 1% sales decline in the international business and a 2.3% sales growth across the Sam’s Club business.
"It was another solid quarter...we are pleased with the first half of the year," Chief Financial Officer Brett Briggs said. "I think one of the things I'm most excited about is that we continued to bring together what we are doing in the stores with what we are doing online."
Online business soars
The company’s online business continues to grow with major acquisitions like Moosejaw, Bonobos and Modcloth. It was the acquisition of Jet.com in September 2016, however, that led to rapid e-commerce growth, giving online giant Amazon.com Inc. (AMZN, Financial) a run for its money.
Walmart has been allocating more money to aggressive promotions and online operations, which took a toll on the company’s bottom line. The company is battling Amazon in the e-commerce space for greater market share. Wal-Mart had earlier struggled to keep pace with Amazon in the online segment, but the recent promotional efforts have been effective.
Last word
Walmart is America’s largest grocer. Groceries are the key to its success as they make up 56% of the company’s total revenue. In the thriving digital age, however, progress in the e-commerce segment cannot be ignored. The company’s strategy to build its online platform is moving on track. However, Wal-Mart has to be on its guard as Amazon is preparing for intensified competition. Target Corp. (TGT, Financial) is also planning to expand its ship and store locations and pickup capabilities. In addition, German retailers Aldi and Lidl are also entering the U.S., looking to get a piece of the massive grocery market. Walmart will have to play its cards really well to defend its turf in this competitive retail environment, particularly the digital space.
Disclosure: I do not hold any positions in the stocks mentioned in this article.
