News About Banking Industry

Walmart beats Q3 earnings target, shares jump

Walmart (WMT) reported third quarter earnings that beat Wall Street’s lowered expectations Tuesday. The retailer has been struggling to get ahead of its major investment in higher employee wages and job training, while continuing to aggressively compete with the likes of Amazon. Walmart warned investors last month that its profit in fiscal year 2017 could drop 6% to 12%, news that sent its shares plunging.walmart_1024

Off Tuesday’s news, Walmart shares rose about 4.5% to $60.52 in morning trading. Walmart has seen slow sales growth at its U.S. stores, where same-store sales have consistently been in the low single digits. It expects sales at its U.S. stores to increase 1% in the fourth quarter. Still, this was the retailer’s fifth consecutive quarter of positive same-store sales, and fourth consecutive quarter of positive same-store traffic.

Walmart U.S. CEO Greg Foran pointed to those stats as evidence that the business is “starting to get some good momentum,” he said on a call with media. Still, Walmart has struggled with its food business in particular, where it has lost some of its competitive edge as dollar stores and full-line grocery stores have rolled out comparable prices, says Brian Yarbrough, consumer analyst with Edward Jones. Grocery accounts for more than half of Walmart’s business.

“As far as driving the business, I think they’ve got to think that is the biggest key to getting sales and growing faster,” Yarbrough says. On a bright note, the food business saw its best top line performance of the year in the third quarter, said Foran, attributing the boost to improved customer service and being more consistently in stock with popular products. That includes fresh food and organic products. Walmart has also deployed 8,000 more department managers across stores in recent months, a move that Foran says has led to sales improvement in certain departments.

The retailer reported earnings of $3.3 billion, or $1.03 a share, above analyst estimates of 98 cents a share, according to S&P Capital IQ. That was down from $3.7 billion, or $1.15 a share, in the same period a year ago. Revenue fell 1.3% to $117.4 billion, which was about on par with estimates from S&P Capital IQ. Sales at Walmart U.S. stores increased 1.5%. Walmart narrowed its guidance for the year, expecting to take a hit from currency fluctuations as a strong dollar dissuades international shoppers. Currency is expected to impact earnings per share by 16 cents, up from previous estimates of 15 cents.

While Foran declined to discuss how the business is faring in the fourth quarter so far, he seemed confident that customers would appreciate the investments Walmart has made in cleaner stores, mobile experiences and improved inventory. “Our stores are in better shape,” he said. “I’m pretty confident in the assortment and prices we’ve got and I think we’re well positioned for the holiday season.”