DE4CC0DE-5FC3-4494-BCBF-4D50B00366B5

Wal-Mart Surges After Results Signal Retail Fears Are Overblown

By Steve Wynne-Jones
Share this article
Wal-Mart Surges After Results Signal Retail Fears Are Overblown

Wal-Mart Stores Inc. climbed as much as 8.8 percent in early trading after its first-quarter results beat analysts’ estimates, tamping down fears that the retail industry is mired in a slump.

U.S. same-store sales rose 1 percent in the first quarter, the Bentonville, Arkansas-based company said in a statement Thursday. Analysts predicted a gain of 0.5 percent, according to Consensus Metrix. Profit amounted to 98 cents a share, beating the 88-cent estimate of analysts.

“There is momentum in many parts of the business,” Chief Financial Officer Brett Biggs said in the statement.

The results provide a note of optimism after weak numbers from Target Corp. and Macy’s Inc., two other retail bellwethers. Investors have grown increasingly concerned that consumers are shifting their dollars away from traditional stores, opting instead to spend their money online or on big-ticket items like cars, home improvements and travel. Wal-Mart’s bottom line also has been under pressure from higher wages and investments in its online operations.

Stock Rallies

ADVERTISEMENT

The stock jumped as high as $68.70 in premarket trading after the report was released. It had been up 3 percent this year through Wednesday.

Wal-Mart, the world’s largest retailer, said earlier that it expected sales to be relatively flat this year, in part because of the strong dollar. Earnings are expected to decline as much as 12 percent. Biggs said on Thursday that the company wasn’t changing its full-year forecast.

Store Improvements

Wal-Mart has been focused on fixing up its 4,600 U.S. stores after years of customer complaints about out-of-stock items, poor customer service and long waits at the checkout line. The company also has raised pay in an effort to attract and retain better workers. And it implemented a new system to stock its shelves and increased staff at the register. After all the changes, investors are looking for signs those investments are paying off.

ADVERTISEMENT

Revenue increased 0.9 percent to $115.9 billion in the period. Analysts were expecting $113.3 billion. Earnings in the second quarter will range between 95 cents and $1.08 a share, the company said.

The company said all of its major international markets saw higher sales -- except for the U.K., where food prices have been falling. Sales were particularly strong in Canada and Mexico, Biggs said.

Target, in contrast, posted slower-than-expected sales growth for the first quarter on Wednesday, blaming “an increasingly volatile consumer environment.” Its shares tumbled 7.6 percent after the results were released.

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.

Get the week's top grocery retail news

The most important stories from European grocery retail direct to your inbox every Thursday

Processing your request...

Thanks! please check your email to confirm your subscription.

By signing up you are agreeing to our terms & conditions and privacy policy. You can unsubscribe at any time.