BENTONVILLE, AR - Recent store investments weren’t enough to overcome some of the headwinds Wal-Mart faced during its second quarter of the fiscal 2016 year.
Wal-Mart’s efforts to improve the store experience, increase wages for employees, and currency fluctuations pressured the retailer’s earnings this year.
Wal-Mart posted its fourth consecutive quarter of increased comp sales which rose 1.5%. Profits decreased 15.1% to $3.48 billion for the quarter. Customer traffic increased 1.3% for the third straight quarter. Total revenue was $120.23 billion, up from $120.1 billion in the same quarter last year, beating analyst expectations, according to USA Today and estimates from Thomson Reuters.
“The changes we need to make require investment, and we’re pleased with the steps we’ve taken,” Wal-Mart CEO Doug McMillon said during a conference call with investors. “We made continued progress towards our plan this quarter. Even if it’s not as fast as we’d like, the fundamentals of serving our customers are consistently improving, and it’s reflected in our comps and revenue growth.”
Wal-Mart has made a number of investments to improve its performance in the past few months, including beefing up its e-commerce operations and opening new fulfillment centers throughout the States. A new technology platform and pricing algorithms have also been employed to help deliver lower pricing than competitors.
In April, Wal-Mart raised the minimum wages for 500,000 full-time and part-time associates to $9 an hour. The company has also made investments in employee training giving its entry-level workers greater chance for promotion.
Charles Holley, Executive Vice President and CFO, said that Wal-Mart’s operating profit will continue to be pressured for the remainder of the year as a result of these investments in store associate wages and additional hours.
Other highlights from the Q2 2016 report include:
- Q2 diluted EPS from continuing operations was $1.08. Currency exchange rates negatively impacted EPS by approximately $0.04.
- Neighborhood Market comps increased approximately 7.3%, with strong growth from new stores. Customer experience scores improved over last year.
- E-commerce sales globally increased approximately 16% on a constant currency basis. Gross merchandise value, or GMV, increased approximately 18% on a constant currency basis.
- Consolidated operating income declined 10%.
- Wal-Mart updated full year EPS guidance to a range of $4.40 to $4.70, from a previous range of $4.70 to $5.05. This range includes Q3 EPS guidance of $0.93 to $1.05.
Shares in Wal-Mart were down approximately 3% in early morning trading following the financial report.
