NEW YORK, N.Y. – Wal-Mart Stores Inc. saw its third-quarter profit fall more than 8 per cent, dragged down as it continues to plow money into e-commerce and improving its stores. While online sales improved, overall revenue fell short of expectations as the company said it was hurt in part by falling food prices.
Profit at the world’s largest retailer still beat Wall Street expectations, and it lifted the bottom end of its full-year profit forecast. Investors focused on the sales, though, sending shares in the Bentonville, Arkansas-based retailer down nearly 4 per cent.
Wal-Mart, like other traditional retailers, has been trying to improve its online operations and be more nimble to compete with Amazon.com and others. It spent more than $3 billion for Jet.com, a deal that closed in September and is aimed at helping it attract younger and more affluent customers. The company had also said it planned to slow its new store openings and pour money into its online efforts, technology and store remodels.
“We are pleased that we can see real progress stemming from our strategic choices,” CEO Doug McMillon said in a statement. But he added, “We will continue to change and pick up speed to reach our longer-term aspirations.”
Global e-commerce sales grew 20.6 per cent in the quarter, up from 11.8 per cent in the prior period. Wal-Mart said it’s setting up teams to accelerate the integration between Wal-Mart and Jet.com and working to use its scale in areas like shipping and sharing its product selection.
The company is increasing the number of products for online orders by 50 per cent for the holiday kickoff next week compared to the number available a year ago. It’s also adding staff to handle customers picking up online orders at the stores, and designating a manager for that area.
Wal-Mart this year also raised its stake in JD.com, China’s No. 2 e-commerce site, after earlier buying an initial stake the company in a deal that also gave JD.com ownership of its Chinese e-commerce site Yihaodian.
“We’re moving quickly with e-commerce innovations and taking a fresh approach to how we think about growth,” Chief Financial Officer Brett Biggs said in a pre-recorded conference call.
The company has launched a number of changes designed to make its stores cleaner and its customer service friendlier and faster. And it’s melding its online and store businesses so shoppers can jump back and forth. It’s making sure its vegetables are fresh, sharpening its prices and pressing ahead with online grocery and pick-up services.
For the three-month period ended Oct. 31, Wal-Mart earned $3.03 billion, or 98 cents per share. That compares with $3.3 billion, or $1.03 per share, a year earlier. Analysts expected 96 cents per share, according to analysts at FactSet.
Revenue rose just 0.7 per cent to $118.18 billion. Analysts expected $118.6 billion. Revenue at stores open at least a year rose 1.2 per cent, shy of analysts’ estimates and slower than the 1.6 per cent pace from the prior quarter. Traffic rose just 0.7 per cent, also slower than the previous quarter. Still, it marked the ninth straight quarter of gains for a key sales measure and the eighth quarterly gain for traffic.
Wal-Mart said it’s lifting the bottom end of its full-year profit forecast to a range of $4.20 per share to $4.35 per share. It expects revenue at stores open at least a year to rise 1 per cent to 1.5 per cent in the fourth quarter, which includes the critical holiday sales.
For the holiday season, Wal-Mart is hammering its low-price message while working to improve store service. It’s deployed holiday helpers at the checkout lines to assist shoppers in finding the shortest lines and will run to the shelves to grab products if customers forgot an item.
Still, the company has plenty of challenges. Rival Target is also strongly emphasizing value — 60 per cent of Target’s messages this holiday season will be on that topic, up about 20 per cent from a year ago. It also is pushing its stylish merchandise from home decor to clothing.
Greg Foran, CEO of Wal-Mart’s U.S. business, said during a conference call that he hasn’t seen that the contentious presidential election has changed shoppers’ behaviour.
“It’s only been a week. I don’t have a lot of data,” Foran said. “For the last three quarters, I haven’t seen any noticeable change.” He said Wal-Mart’s focused on having a good holiday season.
Wal-Mart shares fell $3.01, or 4.2 per cent, to $68.38 in Thursday trading.
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