Wal-Mart Posts Strong Holiday Sales, But E-Commerce Battle With Amazon Pinches Profit -- Update

By Sarah Nassauer 

Wal-Mart Stores Inc. reported strong sales over the winter holiday season, a marked contrast with the weak numbers posted by many brick-and-mortar competitors including Target Corp. and Macy's Inc.

Wal-Mart said Tuesday that sales in stores open at least 12 months rose 1.8% in the quarter ended Jan. 31, the 10th consecutive quarter of gains. More shoppers came to its stores and spent more when they did. But the strength of the company's U.S. store business continues to come at the expense of profits, which fell 18% in the quarter.

The retail behemoth is investing billions to raise U.S. store worker wages, lower prices and expand e-commerce sales to better compete with Amazon.com Inc.

"Rapid advances in technology mean we need to become more of a digital enterprise -- and that's what we're doing," Chief Executive Doug McMillon said in a prerecorded call to discuss the results.

Still, Wal-Mart's global e-commerce sales growth decelerated compared with the previous quarter. Online sales rose 16% including the first full quarter of sales from Jet.com Inc., which Wal-Mart purchased in September. In the previous quarter e-commerce sales rose 21%.

Wal-Mart's U.S. store changes are bearing fruit at a time when many retailers tethered to large store footprints are struggling, challenged by shoppers gravitating to less-profitable online buying and discounters offering low prices. Investors have become wary of the retail market after several reported weak holiday sales including Target, Macy's and Kohl's Corp.

In 2016, while retail sales rose across the board, signaling a strengthening economy, online retailers took most of the spoils.

During the year spending rose 11% at online retailers and fell almost 6% at department stores, according to Commerce Department figures.

Macy's is closing stores and laying off thousands of staffers as it struggles to draw shoppers. On Tuesday, the company reported that comparable-store sales fell 2.1% in the latest quarter and its profit dropped 13%. Macy's said it raised $673 million from selling real estate and would continue to explore options for its properties.

Sears Holding Corp. is also closing dozens of stores and earlier this year received a $1 billion injection of financing from its chief executive, hedge-fund manager Edward Lampert.

Among the turmoil Warren Buffett's Berkshire Hathaway dumped $900 million worth of Wal-Mart shares at the end of 2016, nearly exiting the stock, according to federal filings.

Wal-Mart's share price rose 3% in early trading to $71.43.

The same-store sales increase was driven by strength in Wal-Mart's health and wellness business, helped by branded drug price inflation, an increase in prescriptions and higher over-the-counter sales. The grocery business continued to face pressure from food-price deflation while strong apparel sales led growth in the general merchandise category.

Wal-Mart also on Tuesday announced a 2% dividend increase to $2.04 a share annually.

Over all for the period that ended in January, Wal-Mart reported a profit of $3.76 billion, or $1.22 a share, compared with $4.57 billion, or $1.43 a share, in the year-earlier quarter.

Revenue rose 1% to $130.94 billion. Excluding currency swings, the company said revenue would have climbed to $133.6 billion.

For its year that ends in January 2018, Wal-Mart expects to earn between $4.20 and $4.40 a share, in line with previous statements that earnings would be flat. Analysts, polled by Thomson Reuters, expected $4.33 a share.

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Joshua Jamerson

contributed to this article.

Write to Sarah Nassauer at [e-mail]

(END) Dow Jones Newswires

February 21, 2017 10:03 ET (15:03 GMT)

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