Wal-Mart shares up as the world's largest retailer beats on earnings but revenue falls short

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Customers shop at a Walmart store on January 17, 2017 in Skokie, Illinois.

Wal-Mart's U.S. business accelerated during its fiscal fourth quarter, helping the world's largest retailer top Wall Street's earnings expectations.

Still, even as the company reported its 10th straight quarter of comparable sales growth, revenue fell short of expectations as foreign exchange rates and food deflation weighed on the top line.

Wal-Mart's shares ticked higher in premarket trading.

Here's how Wal-Mart did:

  • EPS: $1.30, adjusted, versus $1.29 per share, adjusted, expected by a Thomson Reuters consensus estimate
  • Revenue: $130.94 billion versus $131.22 billion expected by Thomson Reuters
  • Comparable sales: 1.8 percent increase versus 1.3 percent increase expected by FactSet

Apparel, health and wellness and grocery were some of the top-performing categories at the company's U.S. stores, despite a slow start to the quarter for cold-weather merchandise. Electronics, media and gaming were soft.

Wal-Mart has been investing heavily in both its stores and e-commerce operations, which have weighed on its profitability. A year earlier, the world's largest retailer made a profit of $1.49 per share.

But those investments have paid off for its U.S. business, which recorded its ninth straight increase in quarterly traffic. The company's online sales also accelerated, boosted by its acquisition of Jet.com and the continued rollout of its online grocery service. Online sales rose 29 percent during the quarter.

For fiscal 2018, Wal-Mart expects to earn between $4.20 a share and $4.40 a share, compared with an estimate of $4.33. That includes a profit of 90 cents per share to $1 per share in the first quarter.

In a bid to better compete against Amazon, Wal-Mart has snapped up three online retailers over the past five months for a combined $3.12 billion. The largest of those acquisitions was its $3 billion purchase of Jet.com, which brought Jet Chief Marc Lore on board and led to a reshuffling of Wal-Mart's digital business.

Last month, Wal-Mart scrapped a subscription program it was testing, which offered free two-day shipping for $49 a year. Now, it will offer free shipping on more than 2 million items for no fee when shoppers spend at least $35. That's down from its previous $50 threshold.

The company said at its October investor day that it would significantly slow its pace of store openings in the fiscal year that just began. Instead, it will focus its capital expenditures on e-commerce, the company said at the time.

Wal-Mart has meanwhile been investing in its employees by raising their minimum pay and providing better training.

CNBC

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