Walmart Inc has reported quarterly earnings and sales that topped estimates, driven by strong grocery sales and a revamped website that boosted online purchases.
The world's largest retailer also raised its sales and earnings outlook for the full year, excluding any impact from its acquisition of Indian e-commerce company Flipkart, which it is still in the process of closing.
Walmart's US comparable sales grew the most in a decade, boosted by strong performance in grocery, apparel and seasonal merchandise, which rebounded in the second quarter after a slow start in April.
Walmart has recorded four straight years of US growth, unmatched by any other retailer.
"We saw strong performance in fresh food," the company's US chief executive, Greg Foran, said on an earnings conference call, praising sales in produce, meat and bakery. Grocery sales rose the most in nine years due to improved fresh food offerings.
Weather, E-Commerce Boost Growth
Walmart also benefited from improved weather in May, the first month of the quarter, which led to the biggest quarterly gain in customer traffic in more than six years, chief financial officer, Brett Biggs told Reuters in an interview.
Improved consumer demand and tax cuts that have put more money in US consumers' pockets this year also helped the retailer. US retail sales rose by more than forecast in July, as customers purchased motor vehicles and clothing, suggesting the economy remained strong early in the third quarter.
Walmart's US e-commerce growth also ticked higher than previous quarters, driven by changes like a new website redesign and continued expansion of online grocery offerings. E-commerce sales grew 40%, up from 33% growth in the previous quarter. The retailer said it is on track to increase US e-commerce sales by 40% for the full year.
According to Biggs, the company now offers curbside pickup of online grocery orders in 1,800 US stores, and the service is bringing in new customers.
The growth in online sales comes after a healthy first quarter performance when sales growth rebounded following a sharp slowdown during the crucial holiday months. That had spooked investors, who worried the retailer would not be able to keep pace with rival Amazon.com Inc.
Despite the pick-up in sales, e-commerce losses could be higher this year than last year as it continues to invest in the business, according to Walmart's e-commerce chief, Marc Lore.
The sales performance overshadowed ongoing margin pressures driven by investments in cutting prices, higher freight costs due to a shortage of truck drivers in the country and e-commerce investments.
Gross margins fell for the fifth consecutive quarter and were down 17 basis points.
Walmart's shares were up 10.09% at $99.32 (€87.2) in early trade. The company's stock has fallen around 9% since the start of the year.
Overseas Sales Jump
International sales were up 3.1% at $29.2 billion (€26 billion) on a constant currency basis, helped by strong comparable sales in four of its largest overseas markets Mexico, Britain, Canada and China.
Separately, Asda, Walmart's British supermarket arm, reported a 2.6% rise in quarterly sales on Thursday, showing its recovery was gaining speed ahead of an expected takeover by bigger rival Sainsbury's. Walmart sold a majority stake in ASDA to Sainbury's.
Walmart has taken other steps to change its international business portfolio. In June, Walmart said it has sold an 80% stake in its Brazilian operations to private equity firm Advent International. It paid $16 billion (€14 billion) for a majority stake in Indian e-commerce firm Flipkart.
The retailer also reached agreements to sell its banking operations in Walmart Canada and Walmart Chile.
Sales at US stores open at least a year rose 4.5% excluding fuel price fluctuations, higher than analyst forecasts of 2.38%, according to Thomson Reuters I/B/E/S.
Excluding one-time items such as a loss related to the sale of a majority stake in Walmart Brazil, Walmart earned $1.29 per share, ahead of analysts' expectations of $1.22 per share.
Total revenue increased 3.8% to $128 billion (€112 billion), beating analysts' estimates of $125.97 billion (€111 billion).
Outlook
For the full year, Walmart now expects to earn between $4.90 and $5.05 per share, up from a prior range of $4.75 to $5 a share. The retailer said same-store sales in the United States should rise about 3% in fiscal 2019, up from a prior target of at least 2%.
