Wal-Mart shares surged by almost 10 per cent Thursday after the multinational retail corporation posted a better than expected quarterly performance.
Shares of Wal-Mart reached up to 9.6 per cent as sales in the US market rose. The company’s shares are up at about 13 per cent year to date, but it has also struggled in the past 12 months, with a 9 per cent decline.
The retail giant posted quarter one earnings of 98 cents per share, topping the analysts’ estimates of 88 cents per share. However, it was lower compared to $1.03 per share in the same period last year. Revenues in the quarter increased by 0.9 per cent, reaching $115.9 billion, versus a year-earlier record of $114.83 billion.
The company’s net earnings, however, declined by 7.8 per cent to $3.1 billion from $3.3 billion in the same period last year due to the retailer’s decision to pay higher wages.
“Investment in wages, training and store improvements are beginning to pay off,” said Wal-Mart US Chief Executive Officer Greg Foran on a conference call with the media, emphasizing that its customer service got better and customers find it easier to get what they want.
Wal-Mart’s success was due to its efforts to give shoppers a better experience, leading to increased sales in the first quarter. Sales of Wal-Mart US stores that have been open at least a year increased by 1 per cent, the seventh consecutive quarter of growth for the chain’s domestic business.
The retailer also cited better pricing, assortment, and fully stocked shelves as effective in helping to strengthen sales in grocery. In addition, the company’s smaller-format Neighborhood Market stores proved appealing to shoppers who are looking for fresh food. It also helped in fulfilling pharmacy orders. Neighborhood Market same-store sales, in fact, were up to 7.1 per cent in the quarter.
Furthermore, Wal-Mart has been investing more on e-commerce in an attempt to improve its efforts to go head-on with Amazon. The company has been expanding its services with offers of store pick up for only grocery orders. Earlier this month, the retailer also announced that its three-day shipping program would be down to a two-day shipping guarantee.
Meanwhile, other retail competitors, except Home Depot and Lowe’s, saw a relative decline in sales in the same quarter. Target on Wednesday posted a lower-than-expected sales increase at established stores as customers continue to spend on homes and cars, and not apparel items.