WMT Sees U.S. Sales Expansion Chugging Along Next Yr
Oct 16, 2018
Walmart Inc. expects some of its fastest sales growth this decade as it draws in more digital customers in its turf war against Amazon.com Inc.
Same-store sales in the U.S. excluding fuel will grow 2.5 to 3 percent next fiscal year, the company said Tuesday ahead of its shareholder meeting. That follows expected growth of about 3 percent this year, which would be the fastest pace since 2008, according data compiled by Bloomberg. E-commerce sales will expand by about 35 percent, boosted by more online-grocery pickup locations and new products.
Shares rose as much as 1.1 percent to $94.89 as of 9:35 a.m. in New York. Shares were down 5 percent this year through Monday’s closeWalmart’s web business, led by Marc Lore, has been a bright spot for the retailer as services like online grocery and acquisitions of upscale brands have brought in new customers, who spend nearly twice as much as those who shop only at its stores. Walmart, meanwhile, should benefit from the bankruptcy of Sears Holdings Corp. heading into the crucial holiday season, even as concerns linger over the impact of Chinese tariffs and wage pressure from rivals Amazon and Target Corp.
Investors thus far have been willing to accept losses from the online business as the necessary cost of keeping pace with Amazon, which has already made inroads in categories like apparel. Amazon is now trying to boost its fresh food business and grab market share from the nation’s two biggest grocers, Walmart and Kroger Co. Walmart has responded by lowering prices and introducing grocery service through its Jet.com subsidiary in lucrative urban markets like New York City.
As expected, Walmart also said Tuesday its $16 billion acquisition of Indian e-commerce leader Flipkart would lower earnings this year and next. Excluding Flipkart, next year’s earnings will see a low- to mid-single digit increase, the company said, after the 5 percent boost it already forecast for this year.
“While the top line outlook for 2019 looks healthy and was generally in line with expectations, the margin view for next year did come in softer than expected,” Chuck Grom, an analyst at Gordon Haskett Research Advisors, said in a note.
The focus on e-commerce has allowed Walmart to open fewer brick-and-mortar stores than normal. The retailer will open as many as 10 new locations in the U.S. next year, the lowest rate in at least a decade, data compiled by Bloomberg show.