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Published: Mon, May 22, 2017
Economy | By Melissa Porter

The Competition Between Wal-Mart and Amazon is Heating Up


Wal-Mart Stores Inc on Thursday reported higher-than-expected quarterly sales at established us stores, as investments to bring more customers into the discount retailer paid off and a bigger push into e-commerce boosted online purchases, sending its shares flirting near a 52-week high.

BIG BEAT: Wal-Mart Stores rose 2.8 percent after the world's largest retailer's latest quarterly results beat Wall Street's forecasts.

Same-store sales in the USA were higher by 1.4%, versus the company's guidance for an improvement between 1.0% and 1.5%.

The results reflected Wal-Mart's efforts to lure customers to United States stores through upgrades to infrastructure, better customer service after boosting worker pay, and enhanced e-commerce offerings.

Revenues were up 1.4 per cent at $117.5 billion.

"We delivered a solid first quarter and we're encouraged by the start to the year", Walmart CEO Doug McMillon said. "We're moving faster to combine our digital and physical assets to make shopping simple and easy for customers". Shares of Wal-Mart rose 0.8% in pre-market trading to $75.70.

"All of a sudden, Wal-Mart is the primary competitor to Amazon, as opposed to a fragmented cluster of people", said Greg Portell, a partner at consulting firm A.T. Kearney. "Our plan is gaining traction ..." The 10-year Treasury yield slipped to 2.21 percent from 2.22 percent late Wednesday. "E-commerce is way ahead of where it was this time past year just in the short eight or nine months he's been running it". The giant was well within its own target as US comp-store-sales grew 1.4%, continuing a three-year run. However, profit fell 1.3% in the quarter, as the retailer continued making investments to compete with online retailers and discounters by lowering prices, raising wages and expanding e-commerce services.

Wal-Mart said sales at U.S. stores open at least a year rose 1.4 per cent, excluding fuel price fluctuations, and was the 11th consecutive quarterly increase.

The company's focus on online growth has come from a combination of organic efforts and acquisitions.

While trading at volume above than average, Calpine Corporation (NYSE:CPN) previous 52-week high was $16.07 and moved down -11.51% over the same period, trading at a volume of 10.92 million.

"Working capital initiatives continue to bear fruit, with year-over inventories down over $1 billion and payables up nearly $3.5 billion, and we also note debt balances are down over $3.5 billion year-over-year, which provides Walmart with additional financial flexibility as it continues with its multi-year investment program", O'Shea also said. The retailer's consolidated net income declined marginally to $3 billion in the first quarter.

Lidl, which along with rival limited-assortment discounter Aldi, has caused a massive disruption for the "big four" United Kingdom retailers since rampaging onto the scene and has equally big plans Stateside, with plans to open as many as 600 stores. Last week, a number of department stores reported worse than expected first-quarter results. Brent crude, used to price worldwide oils, rose $1.10, or 2.1 percent, to settle at $53.61 a barrel in London.

The retailer reported earnings per share of $1 in quarter, exceeding average estimates of 96 cents. "As a company, we're moving with speed and executing against the strategy we've outlined".

Analysts expect Alibaba Group Holding Ltd (NYSE: BABA) to report quarterly earnings at $0.66 per share on revenue of $5.21 billion before the opening bell. Its price to sales ratio of 0.47 ranks lower than the industry's 0.95.

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