Wal-Mart’s Effort To Improve Online Sales Is Paying Off
NEW YORK (AP) — Wal-Mart’s fourth-quarter earnings fell nearly 18 percent as the world’s largest retailer was hurt by its investments in e-commerce and stores.
But Wal-Mart saw its U.S. business accelerate — both in customer counts and for a key sales metric — during the period that covers the critical holiday shopping season. It also enjoyed a surging global e-commerce business. The company also said Tuesday that it is raising its dividend.
Shares rose in pre-market trading.
Wal-Mart, like other traditional retailers, has been trying to improve its online operations to be a stronger challenger to online leader Amazon.com. The holiday shopping season was challenging for many retailers, underscoring the changes brick-and-mortar stores need to make. But Wal-Mart’s results show that it’s been able make inroads.
“We’re moving with speed to become more of a digital enterprise and better serve our customers,” Doug McMillon, CEO of Wal-Mart Stores Inc., said in a statement.
Still, Wal-Mart and others also face new challenges, as shoppers face uncertainty about health care and other issues under President Donald Trump. Wal-Mart and other retailers are fighting a Republican proposal aimed at encouraging manufacturing in the U.S. that would essentially tax imported goods — something the retail industry says would increase prices for shoppers on items like clothes and toys by as much as 20 percent. The National Retail Federation, the nation’s largest retail trade group, estimates this so-called border adjusted tax proposal would cost the average family $1,700 in the first year alone. Those kinds of increases would hit hardest on low-income shoppers, Wal-Mart’s main customers.
The retailer is also facing a rising U.S. dollar, which has put a crimp on its international business, which accounts for about a quarter of its total business.
Overall, Wal-Mart has retooled its own online shopping programs and bought up some smaller companies with online strengths. It spent more than $3 billion for Jet.com in a deal aimed at helping it attract younger and more affluent customers. And it just announced that it had bought the outdoor and gear seller Moosejaw for $51 million as it expands its online product selections. Moving closer to the terms of Amazon’s powerhouse Prime program, Wal-Mart is now offering free two-day shipping on online orders of its most popular items with a minimum purchase order of $35. Amazon Prime still costs $99 a year, but comes with services like streaming music and video.
Wal-Mart had also said it planned to slow its new store openings and pour money into its online efforts, technology and store remodels.
Global e-commerce sales grew 29 percent in the quarter, up from 20.6 percent in the prior period. Wal-Mart said it’s working to accelerate the integration between Wal-Mart and Jet.com, and trying to take advantage of its scale in areas like shipping and sharing its product selection. Wal-Mart last year also raised its stake in JD.com, China’s No. 2 e-commerce site. But online sales still only account for a fraction of its total.
Besides melding its online and store businesses so shoppers can jump back and forth, the retailer is has launched changes designed to make its stores cleaner and its customer service friendlier and faster. The company has also invested $2.7 billion in higher wages and training for workers, a move that it says has helped to lower turnover and improve customer service.
The Bentonville, Arkansas-based company said Tuesday it earned $3.76 billion, or $1.22 per share in the three months ended Jan. 31. That compares with $4.57 billion, or $1.43 per share, a year ago.
Excluding certain items, earnings per share were $1.30. Sales excluding memberships fee rose 0.8 percent to $129.75 billion.
Analysts had expected $1.28 per share on revenue of $131.13 billion, according to FactSet. Wal-Mart says a key revenue metric rose 1.8 percent at its U.S. namesake business, up from 1.2 percent in the previous quarter. That marked its 10th straight quarter of increases. Customer counts rose 1.4 percent in its U.S. business, marking the ninth consecutive quarter of gains.
Wal-Mart had seen a slowdown in e-commerce but starting late last year, that business has seen a rebound. In the third quarter online sales rose 20.6 percent.
Wal-Mart’s share rose 2.5 percent, or $1.75, to $71.12 in pre-market trading.
