Walmart Sees ‘Momentum’ in Q2
As the company logs its eighth consecutive quarter of positive comps, Wal-Mart Stores Inc.'s "strategy in the U.S. is working," declared Doug McMillon, president and CEO of the Bentonville, Ark.-based mega-retailer, as evidenced by an accelerated same-store sales gain of 1.6 percent from the first quarter's 1 percent bump. Noting the division's biggest same-sales gain since July 2012, when comps grew 2.2 percent during the three-month period, the company attributed the positive traction to more traffic – which was also the case in its Neighborhood Market banner stores, whose comps climbed a healthy 6.5 percent.
“We’re pleased by the positive momentum in our business,” said McMillon. "We remain focused on building e-commerce capabilities globally and executing our omnichannel plan, as evidenced by our recent alliance with JD.com in China and agreement to acquire Jet.com in the U.S. Walmart is uniquely positioned to provide customers with a seamless shopping experience where we save them time and money.”
During a call with investors, Greg Foran, president and CEO of Walmart U.S., said the company’s “solid second quarter [showed] good progress on the multiyear plan,” with steady improvement. Added Foran, “Customers are responding favorably to the changes we are making,” the contributing factors for which include “consistent improvement in the customer experience,” courtesy of better execution. Citing data from recent shopper surveys, Foran noted, “Customers are reacting to [a] better shopping experience and better execution when they’re in our stores.”
'Running Its Play' Toward Better Execution
Pointing to higher in-stocks and improved service levels, Foran continued, "There is so much upside around Walmart running its play and executing well – that’s really where our focus is on, versus the economy and the consumer."
Cognizant that the ongoing process to right its big ship is sizable, he said the primary focus on execution is trending well with existing customers, which he noted is the primary "base before you attract new customers. Clearly, it’s our intention that we want to do a better job at getting new customers, as well as selling more to the existing ones."
When asked to explain the stronger traffic patterns in its food business and how it determines price investments in specific categories to spur incremental purchases, Foran responded: "It’s not one thing. We spend a lot of time having a look, for example, in food, at the role of the national brands [and] private labels; how [to] draw up a mod; how the product is replenished; whether it’s stable stock or whether it’s assembly stock. You overlay event activities around July 4th, [a sharper] everyday low-price proposition. What happens is that all of those things come together, and you actually start to gradually do a bit better."
He added: "It’s not like anything changes overnight. [W]e’re such a big business, and we’ve got so many things happening, but it’s just gradually incrementally improving things."
In terms of its Q2 performance, Walmart posted diluted earnings per share (EPS) of $1.21 for the second quarter of its fiscal 2017, with currency negatively affecting EPS by about $0.03. Total revenue for the quarter was $120.9 billion, an increase of 0.5 percent. On a constant-currency basis, total revenue came to $123.6 billion, a 2.8 percent increase.
Walmart International’s net sales for the quarter were $28.6 billion. Excluding the effects of currency, net sales totaled $31.3 billion, a 2.2 percent increase. Globally, on a constant-currency basis, e-commerce sales and gross merchandise volume rose 11.8 percent and 13 percent, respectively, which Walmart noted was an acceleration from the first quarter. Consolidated operating income grew 1.6 percent, including a gain of $535 million from the sale of Chinese online grocer Yihaodian. Excluding this gain, consolidated operating income dropped 7.2 percent. As expected, investments in associates and technology, along with currency exchange rate fluctuations, adversely affected results.
Walmart now estimates fiscal year 2017 adjusted EPS of $4.15 to $4.35.