Walmart is Slowly Winning Back U.S. Customers
Wal-Mart Stores (WMT) investors will probably feel some relief from the retail giant’s third-quarter results. On Tuesday, the company said comparable sales at its U.S. stores rose for their fifth straight quarter, and more importantly, more shoppers came into its stores, which is encouraging news as the world’s largest retailer heads into the holiday season.
Last month Walmart frightened Wall Street when it forecast a sharp drop in its profit for next year as it continued to invest billions into e-commerce—where it’s badly lagging Amazon.com (AMZN) —as well as higher wages to improve customer service.
However expensive those efforts are, they do seem to be paying off: Comparable sales at Walmart’s namesake U.S. stores rose 1.5% in the three months ended Oct. 31, and the number of shoppers visiting stores rose 1.7%. While those numbers aren’t earth-shattering, it’s worth remembering all the anxiety surrounding retailers’ stocks after last week’s awful numbers from Macy’s (M) and Nordstrom.
Walmart shares rose 3% in premarket trading.
“To improve the store experience for our customers and create a bridge to our future where digital capabilities will play an increasing role in our stores, we’re making a $1.2 billion planned investment in our people this year that we understood would impact near-term operating income,” Wal-Mart CEO Doug McMillon said on a pre-recorded conference call. “This is by far the biggest driver of the decline in consolidated operating income.”
Earlier this year, Walmart U.S. announced wage hikes for hundreds of thousands of workers to motivate its low-wage employees as their jobs get more complicated and demanding than ever. Walmart has decked out its thousands of stores so online orders can be filled there to help step up crucial efforts to fight back against Amazon.com. And Walmart U.S. CEO Greg Foran has made it a priority to improve customer service and stores’ cleanliness, all while reducing the frequency of out-of-stocks. Last week, Fortune reported that the retailer’s customer satisfaction scores have begun to recover as a result.
On the whole, Wal-Mart revenue fell 1.3% to $117.4 billion, a hair under Wall Street estimates. That decline was largely due to a strong U.S. dollar that has hurt international sales when converted back to the American currency. Wal-Mart’s Sam’s Club wholesale club chain, which has struggled to compete with Costco Wholesale (COST) reported unchanged comparable sales.