NEW YORK (AP) — Wal-Mart raised its earnings outlook for the year and delivered strong profit and sales in the second quarter after the world's largest retailer revamped its stores and improved the shopping experience online, changes that appear to be winning over customers.
The company recorded its largest jump in second-quarter comparable-store sales since the recession eight years ago.
"Our strategy in the U.S. is working," said CEO Doug McMillon.
Shares rose 3 percent in early trading.
Wal-Mart is fighting off competition on multiple fronts, from Amazon.com and dollar stores, to grocers like Kroger, which are ramping up promotions and lowering prices
Wal-Mart has responded with changes at stores and online to stay competitive in a vastly altered landscape. It's spending $2.7 billion on higher wages and other investments for its hourly workers over a two-year period. The company also just rolled out a new system in about 650 Neighborhood Market stores that gives hourly workers more certainty about their schedules.
Wal-Mart says lifting wages, which has turned into a contentious issue for a number of major U.S. restaurant chains and retailers, will lead to a more solid work force that can better serve their customers.
At the same time, it's sharpening its attack against Amazon. Earlier this month, Wal-Mart said it would spend $3 billion to acquire fast-growing online retailer Jet.com. Wal-Mart says that will allow it to grab higher-income and younger customers. It will incorporate some of Jet.com's technology that lowers prices in real time by finding ways to cut costs.
Wal-Mart has also shortened its free-shipping pilot program from three-day delivery to two, and cut a dollar off the membership to $49 a year to contest Amazon's Prime program. While an Amazon membership costs $99 a year, it comes with a lot of perks like streaming music and video and unlimited cloud storage.
The Jet.com deal comes after Wal-Mart's online business had slowed, despite substantial investments. Global online sales rose 11.8 percent in the second quarter, up from the 7 percent pace of the first quarter. But it's far weaker than the 20 percent increases from less than two years ago.
McMillon said in a pre-recorded call that the growth in global e-commerce came from the improvement in the U.S. market, fueled by its rollout of Wal-Mart Pay, its own mobile payment system, and the online grocery and pick up services that it's rolling out. The company added grocery pickup service to 30 more markets in the second quarter, bringing the total to more than 60. Wal-Mart is also vastly expanding the items available on its website.
Second-quarter net income jumped nearly 9 percent to $3.77 billion, for $1.21 per share, in the quarter ended July 31. That compares with $3.47 billion, or $1.08 per share in the year-ago quarter.
Earnings, adjusted for non-recurring gains, were $1.07 per share, a nickel better than Wall Street had expected, according to a survey by Zacks Investment Research.
Revenue was $120.85 billion, also edging out analyst forecasts.
Revenue at U.S. Wal-Mart stores opened at least a year rose 1.6 percent, its best performance since 2008. It was also the eighth straight quarterly gain for comparable-store sales. Customer traffic rose 1.2 percent, marking the seventh straight quarter of gains. The U.S. Wal-Mart division accounts for 62 percent of total sales.
The grocery business showed improvement from the first quarter despite inflationary pressure. Both general merchandise and health and wellness items delivered sold sales growth in the quarter.
The company now estimates that for the current fiscal year, adjusted per-share earnings will be $4.15 to $4.35. Analysts had expected $4.27.
Wal-Mart fared much better than its rival, Target Corp., which cut its profit forecast as customer traffic waned.