Wal-Mart sales come up short of expectations, even as e-commerce soars
WAL-MART Stores Inc.’s brickand-mortar sales fell short of expectations last quarter, even as its acquisition of internet startup Jet.com gave a much-needed jolt to e- commerce orders.
Sales at US stores open at least a year rose 1.2 per cent in the third quarter, the company said in a statement Thursday. That was just shy of the 1.3 per cent predicted by analysts and marked a slowdown from the previous quarter. Total revenue also missed estimates, hurt in part by currency headwinds.
The sluggish sales raised concerns for investors, despite Wal-Mart coming through on its pledge to energise its ecommerce business. Wal-Mart’s US$ 3 billion purchase of Jet. com in September helped fuel a 21 per cent gain in online sales last quarter, an acceleration from the 12 per cent gain in the second quarter. But at its physical stores, a historic streak of food deflation put pressure on the chain.
“We are not satisfied,” Chief Executive Officer Doug McMillon said in the statement. “We will continue to change and pick up speed to reach our longer-term aspirations.”
Wal-Mart shares fell as much as 4.3 per cent to US$ 68.32 in New York, the biggest intraday drop since May. The stock had climbed 16 per cent this year through last Wednesday’s close, lifted by improving performance. That outpaced the 6.5 per cent gain of the Standard & Poor’s 500 Index.
Revenue increased 0.7 per cent to US$ 118.2 billion in the third quarter, which ended Oct 31. Overseas, the strong dollar weighed on sales, turning a 2.4 per cent increase at its international unit into a 4.8 per cent decline.
But profit exceeded projections. Earnings amounted to 98 cents a share, topping the 96 cent estimate, helped by a better tax rate than analysts were anticipating.
Wal-Mart also raised the lower end of its forecast for the year. The Bentonville, Arkansas-based company now expects annual earnings of US$ 4.20 to US$ 4.35 a share, excluding some items. It had previously set the bottom of the range at US$ 4.15.
Chief Financial Officer Brett Biggs said it is too early to tell how the incoming Donald Trump administration will affect its business.
The president- elect’s pledge to renegotiate trade deals with Mexico and China could have a major impact on Wal-Mart, which imports many of its products from China and has a large business in Mexico.
“It is way too early to speculate on anything that might happen with the president- elect,” Biggs said. “When policies change or shift, we will be ready to respond to those and make sure we do what is right for the company.”
Grocery prices across the country have dropped on a yearover-year basis for 10 straight months, a streak of deflation not seen since 1960.
That’s been good for consumers, but it’s brought headaches to Wal-Mart, the largest seller of groceries in the US.
Eggs and beef have have grown especially cheap, making competition fiercer between supermarkets. The run of deflation has squeezed profit margins and sent shares of some low- cost chains tumbling. — WPBloomberg