The world’s largest retailer got even bigger during the second quarter, as the company’s revenue and earnings topped Wall Street forecasts, and it reported its biggest same-store sales gain in four years.
Wal-Mart shares were up 2.7 percent in premarket trading.
The discount chain earned $1.07 a share in the fiscal second quarter, slightly lower than last year’s $1.08 a share. Revenue grew 0.5 percent to $120.85 billion.
Analysts had expected Wal-Mart to report earnings of $1.02 a share on $120.16 billion in revenue, according to a Thomson Reuters consensus estimate.
“We’re pleased with the positive momentum in our business. Our strategy in the U.S. is working as we delivered an eighth consecutive quarter of positive [comparable sales], and international also performed well,” CEO Doug McMillon said in a statement.
Indeed, same-store sales at Wal-Mart’s U.S. division grew 1.6 percent, an acceleration from the first quarter’s 1 percent lift. It was the division’s biggest same-sales gain since the quarter ended July 2012, when comparable sales grew 2.2 percent in that three-month period. Analysts predicted the world’s largest retailer would grow its domestic comparable sales by 1 percent during the latest quarter, according to a FactSet estimate.
The company likewise recorded its seventh straight quarter of positive traffic, which grew 1.2 percent. That result stands in contrast to rivalTarget, which on Wednesday said the second quarter marked the first time in a year and a half fewer shoppers visited its stores. The bull’s-eye retailer’s comparable sales fell 1.1 percent during the three-month period.
During the third quarter, Wal-Mart expects to earn between 90 cents and $1 a share, with comparable sales in its U.S. division rising between 1 percent and 1.5 percent.
Under the leadership of McMillon, Wal-Mart is taking aggressive steps to change its reputation as a retailer that’s focused only on price. The most recent example of this came last week, when Wal-Mart confirmed that it would acquire online-only retailer Jet.com.
In addition to the deal, which was designed to jump-start Wal-Mart’s slowing online sales, the retailer recently opened up registration for its ShippingPass service. That subscription service, meant to compete withAmazon Prime, offers free two-day shipping for $49 a year.
Wal-Mart’s online sales picked up from the first quarter, increasing 11.8 percent, but the rate of growth was slower than last year’s 16 percent lift for the comparable period. Management attributed the acceleration to growth in its third-party marketplace, which added 7 million new items this year for a total of 15 million. The company also credited its online grocery service, which allows shoppers to place their orders on the web and pick them up from the store. Wal-Mart added online grocery to 30 new markets in the second quarter, for a total of roughly 60 markets and 400 locations.
The company is also investing in its stores, including its highly publicized wage increase and training program for employees. These investments have led to more merchandise being in stock, even as overall inventory levels have declined. They’ve also helped Wal-Mart keep its stores cleaner. The retailer has previously said it expects these investments to cut its profitability by 30 cents a share for the full year.
This summer, the company completed the rollout of Walmart Pay, a feature that allows shoppers to pay at the register using their smartphone. Wal-Mart has also promised to start rolling out lower prices across its stores.
Its growing footprint of smaller stores is likewise benefiting the chain. Comparable sales at these Neighborhood Market stores grew 6.5 percent during the second quarter. And its investments into the grocery business helped Wal-Mart grocery business log positive comparable sales and traffic, despite deflationary headwinds.
General merchandise, including apparel, and health and wellness were two of the company’s top performing categories.
Wal-Mart’s customers have benefited from lower fuel prices and job and wage gains. However, along with its wage investments, the company is facing headwinds from a stronger U.S. dollar and food deflation.
Looking abroad, nine of Wal-Mart’s 11 markets grew their comparable sales. The U.K., where Wal-Mart is competing against the likes of Aldi and other low-price grocers, its same-store sales excluding fuel fell 7.5 percent. The company’s comparable sales dipped a more modest 0.5 percent in China.
And at Sam’s Club, comparable sales rose 0.6 percent excluding fuel.