Wal-Mart has punctured all the dire warnings about the dangers posed to retailers in the US (and elsewhere) from Amazon and its takeover of US high end grocery chain, WholeFoods.
At its annual investor day overnight, the chain – the world’s biggest retailer – upgraded earnings guidance and made clear it will not be diverted from remaining Number One by Amazon’s ambitions.
Wal-Mart’s attitude and upgrade helped push the Dow to a new all time high overnight Tuesday.
It was an upbeat upgrade after all the doom and gloom about US retailing which has seen the shares of some of its rivals hammered by the spectre of Amazon.
In fact the Dow industrials recorded its 47th all-time peak of 2017. The Dow rose 0.3% to 22,830 points, making this its eighth gain in the past 10 sessions. The S&P 500 ended the day 0.2% higher at 2,551 points, while the Nasdaq was up 0.1% at 6,586. In individual stocks.
Wal-Mart shares jumped 4.5% in a standout day in the wake of its update at its investor day. On top of the earnings upgrade, a new $US20 billion share buyback helped support the shares during the session.
Wal-Mart says it will maintain its strategy of focusing on domestic existing stores and e-commerce growth to increase sales. (The US stores are overseen by former Woolworth’s senior executive, Greg Foran).
Wal-Mart said it expects adjusted earnings per share growth of 5% in its 2019 fiscal year which will top forecast sales growth of 3%, indicating ambitions to fatten profit margins – with its continued expansion of its online business a key part of that plan.
The company also maintained its adjusted earnings per share guidance in the current fiscal year of $US4.30 to $US4.40 – news that was also welcomed by investors as they contemplate the start of the third quarter earnings reporting season with retail expected to once again be a blackspot.
Wal-Mart has also made it clear that expansion of store numbers for the sake of topline growth is over as a strategy. In its 2019 fiscal year, which ends in January 2019, the retailer plans to open less than 25 stores in the US, down from opening 230 stores as recently as fiscal 2015-16.
But the company says it will open 255 new stores in other countries with a focus on Mexico and China.
Wal-Mart plans build revenue by focusing on its e-commerce business to drive growth. Next year, the company says US revenue from online purchases will rise about 40% and it will add more than 1,000 online grocery pickup locations across the country.
