At U.S. stores, the company said its grocery business continued to improve, with food categories delivering the strongest quarterly comparable sales performance in more than three years, due in part to a lack of market deflation in food.
“From our data, Walmart is … also picking up some customers from mainstream grocers,” GlobalData Retail Managing Director Neil Saunders wrote in a note to clients. “The response to Walmart flexing its price muscles has been good, and we expect further small gains over the rest of this year. A more disciplined focus on low prices is also important as Aldi, and now Lidl, expand into the market.”
However, Wal-Mart’s heavy discounting, coupled with lower sales of higher-ticket items at the start of the quarter, resulted in a slight decline in average ticket amounts.
Meanwhile, all of Wal-Mart’s U.S. store formats showed positive comparable sales to start the year, the company said.
For example, Wal-Mart’s Sam’s Club’s comparable sales, excluding fuel, rose 1.6 percent, while traffic grew by 1.1 percent. Digital growth as Sam’s Club “Club Pickup” increased nearly 30 percent, the company reported.
With respect to its international locations, sales were $27.1 billion for the first quarter, a decrease of 3.5 percent.
Wal-Mart no longer reports an overarching global figure for its e-commerce growth, instead choosing to focus on the U.S. market. Its domestic online performance has been outpacing results overseas, the retailer has said.
Seven of Wal-Mart’s 11 international markets reported positive comps to start the year, CFO Brett Biggs told analysts and investors on a conference call.
“There is a sense that Walmart is getting to grips with some of the issues, but we believe it will be some time before all parts of international make a solid contribution,” Saunders said in an email.
Wal-Mart said it now expects to earn between $1 and $1.08 per share during the second-quarter, excluding a net benefit from the sale of Suburbia, the retailer’s apparel format in Mexico. Thomson Reuters analysts had forecast earnings of $1.07 a share for this period.
During the same period, U.S. same-store sales, excluding fuel, should grow between 1.5 percent and 2 percent, the company said. Sam’s Club comparable sales are estimated to rise between 1 percent and 1.5 percent.
“In our view, Walmart’s investments in price, its focus on service in stores, and its omnichannel push are all paying dividends,” Saunders added. “The delay in tax refunds, which resulted in lower sales of higher ticket merchandise over the early part of the quarter, put a small dent in growth, but not by enough to cause serious concern.”
For fiscal 2018, Wal-Mart has said it expects to earn between $4.20 and $4.40 a share.
“Overall, [Wal-Mart’s] investments have resulted in positive comparable store sales trends and improving traffic,” Stifel analyst Mark Astrachan wrote in a recent note to clients. “Walmart’s success, along with broadly weakening brick and mortar shopping trends, has caused competing retailers to respond with their own pricing actions.”
On Wednesday, big-box retail rival Target reported earnings, sales and comparable sales that topped Street expectations. Target is in the midst of a multiyear turnaround effort, as it attempts to compete with Wal-Mart’s “Everyday Low Price” strategy and Amazon’s encroaching presence over the industry.
“While [Target] is not trying to directly undercut Walmart on prices, it is trying to use everyday lower prices on daily use items to drive customers into remodeled stores that provide a better experience than Walmart,” Astrachan said.
As of Wednesday’s close, shares of Wal-Mart have climbed nearly 19 percent over the past 12 months and are up about 9 percent for the year-to-date period.
Source : CNBC