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Walmart's second quarter sales rise most in decade, shares soar
[NEW YORK] Walmart Inc reported quarterly earnings and sales that topped estimates on Thursday, driven by strong grocery sales and a revamped website that boosted online purchases, and the company's shares soared over 10 per cent in early trade.
The world's largest retailer also raised its sales and earnings outlook for the full year, excluding any impact from its acquisition of Indian e-commerce company Flipkart, which it is still in the process of closing.
Walmart's US comparable sales grew the most in a decade, boosted by strong performance in grocery, apparel and seasonal merchandise, which rebounded in the second quarter after a slow start in April. Walmart has recorded four straight years of US growth, unmatched by any other retailer.
"We saw strong performance in fresh food," the company's US chief executive, Greg Foran, said on an earnings conference call, praising sales in produce, meat and bakery. Grocery sales rose the most in nine years due to improved fresh food offerings.
Walmart also benefited from improved weather in May, the first month of the quarter, which led to the biggest quarterly gain in customer traffic in more than six years, chief financial officer Brett Biggs told Reuters in an interview.
Improved consumer demand and tax cuts that have put more money in US consumers' pockets this year also helped the retailer. US retail sales rose by more than forecast in July, as customers purchased motor vehicles and clothing, suggesting the economy remained strong early in the third quarter.
Walmart's US e-commerce growth also ticked higher than previous quarters, driven by changes like a new website redesign and continued expansion of online grocery offerings. E-commerce sales grew 40 per cent, up from 33 per cent growth in the previous quarter. The retailer said it is on track to increase US e-commerce sales by 40 per cent for the full year.
The company now offers curbside pickup of online grocery orders in 1,800 US stores, and the service is bringing in new customers, Mr Biggs said.
The growth in online sales comes after a healthy first quarter performance when sales growth rebounded following a sharp slowdown during the crucial holiday months. That had spooked investors, who worried the retailer would not be able to keep pace with rival Amazon.com Inc.
Despite the pick-up in sales, e-commerce losses could be higher this year than last year as it continues to invest in the business, Walmart's e-commerce chief Marc Lore said on the call.
The sales performance overshadowed ongoing margin pressures driven by investments in cutting prices, higher freight costs due to a shortage of truck drivers in the country and e-commerce investments.
Gross margins fell for the fifth consecutive quarter and were down 17 basis points, the company said.
Walmart's shares were up 10.09 per cent at US$99.32 in early trade. The company's stock has fallen around 9 per cent since the start of the year.
International sales were up 3.1 per cent at US$29.2 billion on a constant currency basis, helped by strong comparable sales in four of its largest overseas markets Mexico, Britain, Canada and China.
Separately, Asda, Walmart's British supermarket arm, reported a 2.6 per cent rise in quarterly sales on Thursday, showing its recovery was gaining speed ahead of an expected takeover by bigger rival Sainsbury's. Walmart sold a majority stake in ASDA to Sainbury's.
Walmart has taken other steps to change its international business portfolio. In June, Walmart said it has sold an 80 per cent stake in its Brazilian operations to private equity firm Advent International. It paid US$16 billion for a majority stake in Indian e-commerce firm Flipkart.
The retailer also reached agreements to sell its banking operations in Walmart Canada and Walmart Chile.
Sales at US stores open at least a year rose 4.5 per cent, excluding fuel price fluctuations, higher than analyst forecasts of 2.38 per cent, according to Thomson Reuters I/B/E/S.
Excluding one-time items such as a loss related to the sale of a majority stake in Walmart Brazil, Walmart earned US$1.29 per share, ahead of analysts' expectations of US$1.22 per share.
Total revenue increased 3.8 per cent to US$128 billion, beating analysts' estimates of US$125.97 billion.
For the full year, Walmart now expects to earn between US$4.90 and US$5.05 per share, up from a prior range of US$4.75 to US$5 a share. The retailer said same-store sales in the United States should rise about 3 per cent in fiscal 2019, up from a prior target of at least 2 per cent.