Walmart Rides Strong Consumer Spending to Faster Sales Growth --Update

08/16/18 08:40 AM EDT
By Sarah Nassauer 

Walmart Inc. said sales rose at the fastest rate in over a decade as the world's largest retailer continues to draw more people to stores and benefit from strong consumer spending boosting performance at many retailers.

Sales at existing U.S. stores and websites rose 4.5% during the second quarter ended July 31. Walmart also said it expects sales and profit to rise more than previously expected during the current fiscal year. Sales in existing U.S. stores will rise 3%, the retailer said.

Buoyed by rising wages and employment, plus a tax cut, all of which have translated into disposable-income gains, consumers are spending again with more abandon than they have in years.

Other retailers including Home Depot Inc. and Macy's Inc. said earlier this week sales rose in the second quarter. Home Depot raised its earnings and sales targets for the year due to rising home-improvement purchases and a strong U.S. economy.

Walmart shares have fallen over 8% so far this year, dropping most precipitously since February when the retailer reported a slowdown in ecommerce sales growth during the fourth quarter. Shares surged 10% in premarket trading to $99.61.

Walmart said its quarterly U.S. ecommerce sales picked up compared with earlier this year, rising 40% versus the same quarter last year, up from 33% during the first quarter and in line with the retailer's expectations.

"Customers tell us that they feel better about the current health of the U.S. economy as well as their personal finances," said Walmart Chief Executive Doug McMillon in an earnings release. "They're more confident about their employment opportunities."

Walmart said fresh-food sales were particularly strong, while warm weather helped spur purchases of lawn, garden and pool products along with clothing.

That corresponds with trends reported by other retailers, as well as industry-wide trends. The Commerce Department said Wednesday that July retail sales -- a measure of spending at U.S. stores, websites and restaurants -- rose 6.4% compared with the previous year.

Walmart, which booked $128 billion in total quarterly sales, has invested heavily in recent years to grow sales online around the globe to fend off Amazon.com Inc. That has helped the chain rise above the sales slump suffered by other brick-and-mortar retailers facing new consumer buying behavior. This quarter marked over three years of quarterly sales growth for Walmart.

But the retailer continues to invest heavily online and to lower product prices versus competitors, while facing rising commodity and transportation costs. In the second quarter operating income fell 3.7% to $5.8 billion.

Walmart is leaning on the profits of U.S. stores to grow online, said Chief Financial Officer Brett Biggs in an earnings release. The company expects ecommerce loses this year to be higher than last, he said.

Walmart said its per-share earnings for the full year would hit $4.90 to $5.05, up from a previously expected range of $4.75 to $5. Walmart reiterated that its planned investment in Indian ecommerce company Flipkart would reduce full-year per-share earnings by 25 cents to 30 cents.

Write to Sarah Nassauer at sarah.nassauer@wsj.com

 

(END) Dow Jones Newswires

August 16, 2018 08:40 ET (12:40 GMT)

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