Walmart Posts Impressive 2nd Quarter Results

Retailer is remodeling stores and improving grocery section

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Aug 21, 2016
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Walmart (WMT, Financial) posted better-than-expected second quarter results on Thursday and also raised its annual guidance even as other retailers were struggling to put up decent numbers. The company is reaping the benefits of shutting down its poor performing stores and altering its merchandise combination. Sales in stores open for more than one year were up for the eighth straight quarter. The world’s largest retailer recorded net income of $3.8 billion, an improvement of 8.6% from last year's comparable quarter. Walmart reported EPS of $1.21, well above analyst estimates of $1.02. Here’s a lowdown on the company’s second quarter performance.

By the numbers

Walmart generated revenue of $120.9 billion during the second quarter that surpassed analyst estimates of $119.3 billion. Comparable store sales were up 1.6%. Walmart’s results came in after Target’s (TGT, Financial) dismal earnings that plunged 9.7%, which forced the latter to lower its outlook for the year. Other U.S. retailer chains also reported soft results. As such, investors happily welcomed Walmart’s numbers that sent its shares up 1.9% to $74.30.

The shift in trend in favor of online sales is hurting the volumes of brick and mortar chains, and Walmart is no exception. However, the company has been taking effective measures to counter such changes by offering deals, providing smooth service and building an experience that an online set up lacks. Walmart has also worked on improving wages, revamping stores and developing its workplace culture.

Walmart is also putting in efforts to strengthen its online platform. The company’s online sales, making a tiny proportion of the total revenue, came in at $13.6 billion in fiscal 2015. However, it may be surprising to know that it is the most popular online retail portal in the U.S. after Amazon (AMZN, Financial). Walmart CFO Brett Biggs said, "We’re continuing to ensure that we make decisions that allow us to focus on the right businesses to win long term."

Strategic moves showing results

It is interesting to know how Walmart managed to post a successful quarter, while other fellow players were faltering. The company’s U.S. chief executive Greg Foran justifies this with the company’s cumulative efforts in various directions that are bearing positive results. Walmart has undertaken several strategic moves over the past few quarters in order to update itself with changing customer behavior. This has also been reflected in its latest quarterly results.

It’s a combination of factors such as improving groceries, upgrading the looks of the stores, giving seamless customer services and attractive discount deals. The company has poured billions into revamping its stores across the U.S., increasing employee wages, and making its e-commerce operations more efficient. In the first quarter, Walmart closed several underperforming stores. Transitions such as these are bound to excite customers and in turn bring good results for the company.

Walmart has been concentrating on the online segment. One of Walmart’s efforts in this direction can be seen in the $3 billion Jet.com acquisition that it announced a week ago. Company chief executive Doug McMillon said, "We remain focused on building e-commerce capabilities globally." He further added, "Walmart is uniquely positioned to provide customers with a seamless shopping experience where we save them time and money."

Considering Walmart’s gargantuan size, the company is not expected to see steep growth. However, the company’s endeavor is commendable and should help it progress in the right direction. Walmart has lifted its guidance for the full year and expects EPS to come in between $4.15 and $4.35. That compares with its earlier projection of $4 and $4.30.

Disclosure: I do not hold any position in any of the stocks mentioned in this article.

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