Wal-Mart Plans to Slow New Store Openings, Invest in Online
NEW YORK — Wal-Mart Stores Inc. is planning to slow new store openings as it looks to pour more money into its online efforts, technology and store remodels.
Wal-Mart closed on its more than $3 billion buyout of the fast online retailer Jet.com last month, showing how heavily it’s willing to invest as it tries to boost online sales that totaled $13.7 billion last year – still just a fraction of the company’s annual revenue.
The world’s biggest retailer also said Thursday that it anticipates fiscal 2018 earnings per share being about flat versus its fiscal 2017 adjusted earnings per share.
Wal-Mart foresees fiscal 2019 earnings per share growth of about 5 percent.
Wal-Mart, based in Bentonville, Arkansas, outlined its plans for the next several years ahead of its meeting with investors Thursday. Executives are expected to offer more updates on how it will integrate its Jet.com business with its online operations and offer more insight into how it will compete against online leader Amazon.com.
“We are encouraged by the progress we’re seeing across our business and we’re moving with speed to position the company to win the future of retail,” said CEO Doug McMillon in a statement. “Our customers want us to run great stores, provide a great e-commerce experience and find ways to save them money and time seamlessly – so that’s what we’re doing.”
Like its direct store rivals, Wal-Mart is reinventing itself to be more nimble as it fights off competition from online leader Amazon.com, whose Prime shopping program is swiftly converting members into loyal shoppers. And it faces competition from dollar stores and traditional grocers like Kroger, which are ramping up promotions.
But Wal-Mart has seen its investments online and in the stores pay off – and it’s starting to gain ground over some of the competitors.
Wal-Mart has launched a flurry of changes, from making sure its vegetables look good to cleaning up its stores to being sharper on keeping prices low. It’s melding online services with its massive fleet of stores – rolling out a mobile payment system to speed checkouts. And it’s pushing ahead with online grocery and pick-up services. It’s in the second year of its $2.7 billion investment in its workers that involves higher pay and more training. It says that such investments as well as the other moves are already helping to improve customer service in the stores.
Wal-Mart raised its annual profit outlook in August after reporting its eighth straight quarterly increase in revenue of stores opened at least a year and the seventh quarterly gain in customer traffic at its Wal-Mart U.S. namesake business. Global online sales rose 11.8 percent in the second quarter. That’s up from the 7 percent pace of the first quarter but still far weaker than the 20 percent increases from less than two years ago.
Wal-Mart shares fell $2.16, or 3 percent, to $69.51 in morning trading Thursday.
In contrast, Target reported that a key revenue measure was down 1.1 percent in the second quarter, after seven straight quarters of gains. And it saw fewer customers in the store for the first time in a year and a half. Target is struggling to get its groceries right and it also didn’t push the second part of its “Expect More, Pay Less” slogan. Target’s shares are down 6 percent for the year and are hovering at about $67.
Last month, Wal-Mart closed the deal to buy Jet.com. It believes that it will help it grab higher-income and younger customers and will be incorporating some of Jet.com’s technology that lowers prices in real time.
But Wal-Mart still has plenty of challenges. The company faces challenges in China, and it’s struggling in the U.K and Brazil. The company has been making some changes to bolster its business overseas. The company announced Wednesday that it was increasing its stake in JD.com, China’s No. 2 e-commerce site, to 10.8 percent from 5.9 percent. The move comes nearly four months after Wal-Mart bought an initial stake in JD.com in a deal that also gave JD.com ownership of its Chinese e-commerce site Yihaodian, including the brand and app.
In the release issued Thursday, Wal-Mart said it would spend $11 billion on capital expenditures this year, and the same for the following fiscal year. In the last fiscal year ended in January, the company spent $11.5 billion on capital expenditures. But Wal-Mart said it will be investing more of that money in e-commerce and digital initiatives.
The company said that it plans to open 130 U.S. stores this year, but that’s below its forecast issued last year that it would open 135 to 155 new stores. In its last fiscal year that ended in January, it opened 230 U.S. stores. It said it plans to open another 55 U.S. stores next year. By type of store, Wal-Mart plans to open 60 supercenter stores and 70 small-format stores or what it calls its Neighborhood Market stores this year. And for next year, the breakdown is 35 supercenters and 20 smaller format stores.
Wal-Mart reiterated that its earnings per share for the current year on an adjusted basis would be $4.15 per share to $4.35 per share on an adjusted basis.