Wal-Mart Stores (WMT) reported on Thursday that comparable sales at its U.S. stores rose 0.5% last quarter, its first increase in 7 quarters, but the discount retailer expects businesses to improve only marginally in the current, crucial holiday quarter.
Walmart’s U.S. business has been hurt in the last two years by cuts to the government programs many of its shoppers rely on to get by, but also by its own missteps, including not always having the lowest prices as promised, shelves that are sometimes bare and a drop in customer visits as many have started to shop more at dollar stores. The company has invested heavily in e-commerce, expanded its promising fleet of smaller-format stores and grown more aggressive in its pricing to remedy that. And those efforts are showing some results, but much remains to be done.
“I’m encouraged that comp sales were positive in Q3 (third quarter), but we’re still not satisfied. We have areas to improve, including in the customer experience and in our price leadership position,” CEO Doug McMillon said in a statement.
The company also reported a slightly better than expected profit of $1.15 per share ($3.7 billion), while analysts were expecting $1.12 per share. Global sales rose 2.8% to $118.1 billion.
Despite the return to growth, albeit quite modest, the results show many problems persist for Wal-Mart. Once again, fewer shoppers came into its U.S. stores last quarter as traffic fell 0.7% (a smaller drop than in previous quarters), though at least the shoppers that did come in spent more. And the company is expecting comparable sales, which includes e-commerce and sales at stores open at least a year, to grow 1% at the most in this current quarter.
Moreover, comparable sales of general merchandise fell, and its gross profit fell a bit, likely the effect of its aggressive pricing, which will continue into the holiday season. Grocery sales, which accounts for 56% of the total, were flat. Walmart U.S. generates about 60% of company sales.
Wal-Mart also continued to struggle in key international markets, such as the United Kingdom and China, though bright spots included Canada and Mexico.
Still, many of its efforts to re-energize its business showed continued promise. For one thing, its e-commerce sales rose 21%. For another, comparable sales at its Neighborhood Market stores rose 5.5%. And Sam’s Club, its warehouse club business, saw its comparable sales increase 0.4%
Wal-Mart has made it clear it is going all out to win sales during what is already an intensely promotional holiday season, with more deals earlier in the Christmas period. It will have to fight for even that modest U.S. growth it expects.