Wal-Mart draws more shoppers, raises fiscal-year outlook

Thu Aug 18, 2016 2:53pm EDT
 
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By Nandita Bose

(Reuters) - Wal-Mart Stores Inc (WMT.N: Quote) reported higher-than-expected quarterly earnings on Thursday, saying it benefited from cleaner and more efficient U.S. stores, investments in technology that improved online shopping and higher employee wages that fostered better customer service.

The world's largest retailer has been spending heavily to entice consumers back to its stores with better stocked shelves, and improving its e-commerce business by investing in new warehouses that can deliver online shipments faster. Last week, it announced the acquisition of online startup Jet.com for over $3 billion to better compete with Amazon.com Inc (AMZN.O: Quote).

Wal-Mart also increased entry level wages to $10 an hour earlier this year and said it will invest $2.7 billion in employee compensation and training over two years, a move it said contributed to improved service in its stores.

These steps, analysts said, helped Wal-Mart to raise its fiscal-year forecast and buck a string of weak results from higher-end brick-and-mortar competitors like Target Corp (TGT.N: Quote), Macy's Inc (M.N: Quote) and Kohls Corp (KSS.N: Quote). Target cut its fiscal-year profit outlook on Wednesday after quarterly sales fell more than expected.

Wal-Mart U.S. Chief Executive Officer Greg Foran said on a conference call that the company's customers were still cautious with their spending but were visiting stores more often and buying more items. Store visits increased 1.2 percent, and the average size of an order rose 0.4 percent during the second quarter ended on July 31.

"We are seeing a steady improvement in the U.S. business, and it is responding favorably to the changes we are making," he said.

The Bentonville, Arkansas-based company said sales were strong for grocery items and apparel but weak for electronics.

"Walmart's strategic investments are generating traction, which is especially meaningful, given a large portion of its customer base remains challenged," said Moody's analyst Charlie O'Shea.   Continued...

 
A Wal-Mart sign is seen in Miami, Florida May 18, 2010. REUTERS/Carlos Barria