Better pay helps Wal-Mart draw more shoppers, boosts earnings

Customers respond to cleaner stores, faster checkouts

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Reuters

Wal-Mart Stores reported higher-than-expected quarterly earnings on Thursday, saying employee wage increases led to an improved shopping experience that helped draw more customers to its U.S. stores.

The world’s largest retailer also raised its fiscal-year profit forecast, sending its shares up 1.5 percent.

For the second quarter in a row, the company bucked a string of weak results from higher-end brick-and-mortar competitors like Target, Macy’s and Kohls. 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, Ark.-based company said sales were strong for grocery items and apparel but weak for electronics.

Wal-Mart has been spending heavily to get customers back. Earlier this year, it increased entry-level wages to $10 an hour and said it would invest $2.7 billion in employee compensation and training over two years, a move it says has led to cleaner stores, faster checkouts and better customer service.

“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.

The retailer said it was difficult to quantify the effects of low gasoline prices and unseasonably warm weather, but those factors contributed to overall sales growth.

Online sales growth accelerated sequentially for the first time in more than five quarters, rising 11.8 percent from 7 percent in the first quarter on the back of investments in technology and warehouses to fulfill those orders.

Chief Financial Officer Brett Biggs said e-commerce growth was stronger in the United States than in major overseas markets, mainly because of its larger third-party seller business and the continued rollout of online grocery pickup options.

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