Wal-Mart sees online sales surge, more shoppers at stores

BENTONVILLE, Ark. -- Wal-Mart saw online sales surge as it changed up its shipping offers and drew more shoppers to its stores as well in the most recent quarter, even as retail overall is more competitive.

The world's largest retailer said Thursday sales at established stores rose for the 11th straight quarter, and customer traffic rose for the tenth quarter in a row. That's a contrast with many rivals that saw both those figures drop.

Online sales at Walmart.com rose 63 percent, dramatically up from the 29 percent growth in the previous quarter. Though the company has been buying up smaller internet retailers, Wal-Mart said a majority of the increase was through Walmart.com and was fueled by changes in its shipping strategy and a discount for shoppers who pick up their online orders.

"We're transforming to become more of a digital enterprise," said Doug McMillon, CEO and president of Wal-Mart Stores Inc.

Wal-Mart's report stood out amid a largely gloomy environment for retailers, after chains such as Macy's, Kohl's, J.C. Penney and Target saw declines in comparable-store sales. Even off-price retailer TJX Cos., which has done better than many as customers hunt for bargains, missed forecasts for that sales measure. And it underscores Wal-Mart's efforts to narrow the gap between itself and online leader Amazon and widen the distance between itself and other competitors.

Retail bankruptcies are setting a record pace this year, and store closures are expected to exceed those of 2008 after the financial crisis. Research firm RetailMetrics, which tracks results from more than a hundred chains, said overall they are expected to record a flat increase in revenue at established stores for the quarter, the worst performance since the third quarter of 2009. Excluding Wal-Mart's results, there would be a 0.8 percent decline.

"Wal-Mart is effectively competing in a tough retail environment, and given its size, scale and leverage will be able to stay the course on the current strategy," Stifel analyst Mark S. Astrachan wrote in a note.

The Bentonville, Arkansas-based company has retooled how it operates online as customers get used to free shipping and other enticements that add costs and hurt the bottom line. It also has accelerated that shift with its acquisitions.

Wal-Mart spent more than $3 billion for Jet.com last year in its bid to lure younger and more affluent customers. With Jet.com founder Marc Lore installed as head of Walmart.com, it bought ShoeBuy.com, outdoor-gear seller Moosejaw and trendy-clothing seller ModCloth. The clothing sites are operating as stand-alone operators, separate from Walmart.com, and appeal to younger shoppers.

The company still is looking for startups to buy. Since Lore joined the company, the number of items available, including on its third-party online marketplace, has risen to more than 50 million. That's up 10 million from a year ago. Wal-Mart is working to accelerate the integration between Walmart.com and Jet.com, and trying to take advantage of its scale in areas like shipping.

McMillon said while the acquisitions have garnered lots of attention, "the plan in e-commerce is not to buy our way to success."

"The majority of our growth is and will be organic," McMillon said. "The acquisitions are helping us speed some things up."

Wal-Mart is trying aggressively to compete with Amazon's juggernaut Prime membership, scrapping a fee-based shipping program test earlier this year in favor of free, two-day shipping for online orders of its most popular items with a minimum purchase order of $35. Lore told reporters Thursday that Wal-Mart customers are placing more orders and spending more than before.

The Amazon Prime program costs $99 a year but comes with services such as streaming music and video. Amazon has countered, lowering the free-shipping minimum-purchase price for non-members.

In April, Wal-Mart also began offering discounts on thousands of online-only items when customers elect to have them shipped to a store for pickup -- cheaper for the company than delivering to people's homes. Wal-Mart plans to expand the price cuts to more than a million items by the end of June.

Even as it goes after Amazon online, Wal-Mart is shoring up its stores, working to make customer service friendlier and faster. It's trying to be more aggressive in having lower, consistent prices throughout the store. The company also has invested $2.7 billion in higher wages and training for workers to decrease turnover and make the shopping experience more appealing.

For the first quarter, sales at stores open at least a year rose 1.5 percent, at the top end of the company's estimated range. That was fueled by a customer traffic increase of 1.5 percent. Wal-Mart said its grocery business continued to improve, with food categories delivering the strongest sales performance in more than three years. Grocery is a key category because it drives shoppers frequently to the store and they are then likely to pick up other items.

Wal-Mart reported first-quarter profit of $3.04 billion. On a per-share basis, it earned $1. The results beat Wall Street expectations of 96 cents per share, according to a poll by Zacks Investment Research. Revenue was $117.54 billion, just shy of the $117.63 billion analysts had expected.

The company expects its per-share earnings to range from $1 to $1.08 for the current quarter. Analysts forecast adjusted earnings per share of $1.07.