Shares in Walmart closed up more than 9% yesterday after the retail giant reported higher than expected quarterly revenue, bucking the recent trend of disappointing results across the industry.
Overall group revenues were up 0.9% to $115.9bn, although operating income declined 7.1% to $5.28bn as a result of planned investment in growing its online business and currency fluctuations.
In its core US operations, total sales rose 4.3% to $73.3bn with comparable sales increasing 1%, driven by a sixth consecutive quarter of positive customer traffic, up 1.5%. Walmart’s Neighborhood Market format also saw comparable sales increase a healthy 7.1%.
On a constant currency basis, sales in the group’s international division rose 4.3% to $31.58bn, despite disappointing performance at Asda in the UK where like-for-like sales slipped 5.7%.
In contrast to recent downbeat assessments of trading conditions by competitors, Brett Biggs, Walmart’s executive vice president and CFO, said that demand at its stores had been pretty consistent since the beginning of year. “We are proud of the overall results in the first quarter, and there is momentum in many parts of the business,” he said.
“Additionally, we expect comp sales for Walmart U.S. to be about +1.0%, and Sam’s Club, without fuel, to be slightly positive for the 13-week period ending July 29, 2016,” Briggs added.
Walmart has been focused on revamping its stores and improving product availability as part of its efforts to lure back customers from rivals. “We are encouraged by the Walmart US (comparable sales) and believe it’s attributable to real improvement in our store experience,” said Chief Executive Doug McMillon. “Our customers are giving us positive feedback.”
The group said yesterday that it was now planning to move ahead more quickly on its investments in price that began recently and helped lift performance in the last quarter. Analysts said the cuts will put more pressure on Walmart’s rivals such as Target which this week reported a lower-than-expected increase in comparable sales as US consumers continued to spend on big-ticket purchases rather than discretionary items like clothing.
“You’re going to be worried about grocery stores. Wal-Mart is a quarter of all grocery dollars in the U.S. You’re going to worry about dollar stores. You’re going to worry about Target,” said Chris Horvers, retail analyst at JPMorgan.