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August 19, 2016

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Wal-Mart lifts fiscal-year profit outlook

WAL-MART Stores Inc raised its fiscal-year profit forecast yesterday and posted higher-than-expected quarterly earnings, an improvement it attributed in part to a better shopping experience resulting from employee wage rises.

Shares of the world's largest retailer rose over 4 percent.

Earlier this year, Wal-Mart said it would invest US$2.7 billion over two years to increase entry-level wages to US$10 an hour, a move the company said has led to cleaner stores, faster checkouts and improved customer service.

“Walmart’s strategic investments are generating traction, which is especially meaningful, given a large portion of its customer base remains challenged,” said Moody’s analyst Charlie O’Shea.

The company bucked a string of weak results by higher-end brick-and-mortar competitors like Target Corp, Macy’s Inc and Kohls Corp.

Online sales growth accelerated sequentially for the first time in five quarters, rising 11.8 percent from 7 percent in the first quarter.

However, the higher wages and investments in automated warehouses dedicated to filling online orders hit profitability. Excluding a non-cash gain of US$535 million from sale of Wal-Mart’s China e-commerce business, operating income dropped 7.2 percent.

Earnings per share came to US$1.07, excluding the gain and other items, in the second quarter ended on July 31. Analysts on average were expecting US$1.02, according to Thomson Reuters.

Wal-Mart raised its fiscal-year earnings outlook to between US$4.15 and US$4.35 a share from a previous range of US$4 to US$4.30.

Sales at US stores open at least a year rose 1.6 percent, excluding fuel. That was the eighth straight quarterly gain and exceeded market hopes for a rise of 1 percent, said research firm Consensus Metrix.


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