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Wal-Mart scores solid US sales; earnings dip
[NEW YORK] Wal-Mart Stores benefited from increased sales in US stores and online during the critical holiday shopping quarter, although earnings fell on higher expenses, according to results released Tuesday.
The world's biggest retailer saw net income fall nearly 18 per cent in the fourth quarter to US$3.8 billion compared to the final three months of 2015. Revenues rose one per cent to US$130.9 billion.
The results underscored the benefits and drawbacks of the retail giant's ramped-up investment in employee wages, store beautification and e-commerce in a bid to fend off competition from Amazon and others. Shoppers are indeed returning to stores and buying more, but profit margins are down.
Comparable sales at US Wal-Mart stores, one of the most closely scrutinised benchmarks, rose a solid 1.8 per cent. That helped offset the hit from lower international sales due in part to the strong US dollar.
Analysts described the US investment as a tradeoff.
"From our own store visits, the greater availability of associates was noticeable, and there was far more activity on the shop floor with demos and entertainment helping to improve conversion rates among shoppers," consultancy and research firm GlobalData said a note.
However, "All that said, Walmart's sales success came with a cost attached." Wal-Mart also scored an impressive 29 per cent rise in US online sales. The gains follow major investments, including the US$3.3 billion purchase last year of e-commerce company Jet.com.
Wal-Mart said e-commerce volumes were up following a programme to provide free two-day shipping on goods for minimum orders above US$35.
"We're moving quickly to respond to the current opportunities as well as to innovate and transform the shopping experience for our customers in the future," Wal-Mart chief executive Doug McMillon said.
Marc Lore, the former head of Jet.com and now the chief executive of Walmart eCommerce US, said the company may do additional acquisitions to gain merchandise and strengthen brand relationships following purchases earlier this year of ShoeBuy, an online shoe company, and Moosejaw, an outdoor retailer.
"There are a lot of categories that we're actively looking at," Mr Lore said on a conference call with reporters.
Other efforts include boosting the efficiency of transactions for the most ordered items, one million goods that comprise two-thirds of all e-commerce sales, Lore said.
Prices of Wal-Mart shares jumped 3.6 per cent to US$71.87 in morning trading.