© Reuters. FILE PHOTO: CEO of Walmart Doug McMillon, taken during a discussion in Washington on April 11, 2017
By Nandita Bose
WASHINGTON (Reuters) – US retailer Walmart Inc (N 🙂 announced strong second-quarter results and increased its earnings expectations for the year, temporarily offsetting concerns over consumer demand resulting from Chinese import tariffs.
Walmart's performance was favored by shoppers who spent more money in their stores and on their websites, indicating that the US consumer economy has not lost momentum and its shares were up 6.1% to $ 112.69. Dollar increased.
The largest retailer in the world has seen growth in the US over the last 20 or 5 years and has not been surpassed by any other retail chain.
On Wednesday, Macy's Inc (N 🙂 lowered its annual earnings outlook amid concerns over tariff-induced price increases and the consequent impact on demand. On Thursday, JC Penney (N 🙂 posted a 9% drop in sales.
According to analysts, the performance contrast suggests that there is no evidence that demand in the economy is declining sharply, and that retailers have less need for growth to improve their business strategies.
Retail sales in the US rose in July, which could help dispel fears on the financial markets that the economy could be in recession.
Consumers are responding to the company's changes to its business, and the company is gaining market share, CEO Doug McMillon said in a statement. Walmart gained shares in the food and general merchandise categories this quarter, the company said.
The retailer generates 56% of its food and grocery turnover, enabling it to better handle tariff pressure than many competitors, analysts said.
In an interview on Thursday, CFO Brett Biggs said Walmart raised prices for some items, but did not pass the full cost pressure on to consumers.
It's about negotiating with suppliers and getting them from alternative delivery bases, he said.
"We still feel good about the consumer," said Biggs.
The company told the Trump administration to continue negotiations with China and said how this move affects consumers and prices.
"We understand that free trade must also be fair trade," said Dan Bartlett, executive vice president of corporate affairs, to reporters in a conference call.
Walmart shopping spree was 5.2% more expensive in June than a year earlier, according to Gordon Haskett Research Advisors, who compared prices for a basket of about 76 identical items last year.
US President Donald Trump raised $ 200 billion in Chinese import tariffs from 10 percent earlier this year to 25 percent. This has begun to drive up prices for thousands of products including clothing, furniture and electronics.
Earlier this week, Trump withdrew its September 1 deadline to impose 10% duty on remaining Chinese imports and postponed tariffs on mobile phones, laptops, and other consumer goods to hedge US Christmas sales.
The relocation relieved the retail trade, but will hardly diminish the impact on consumers during the holiday season. Most retailers have bought their goods for the Christmas season, and most of the inventory has already arrived in US ports and warehouses.
NO CHANGE IN THE WEAPONS PURCHASING POLICY
Walmart also came under increasing pressure and was criticized for continuing to sell firearms after being killed in two mass shootings, one in his shop, of 31 people in Texas and Ohio.
The retailer said its arms sales policy has not changed.
It said it has about 2 percent of the market for firearms and is not among the top 3 sellers. It has a share of 20 percent in the ammunition market.
"We are encouraged to see broad support to bolster background controls and remove weapons from those who are determined to pose an immediate threat," said CEO Doug McMillon.
McMillon said, "a renewed authorization to ban offensive weapons should be discussed to determine how effective it is to keep weapons made for the war out of the hands of mass murderers."
Walmart's Bartlett said it has also made it clear that employees can voice their concerns about arms sales, and no employee is at risk.
A young Walmart employee in California started a petition against the sale of firearms for which over 50,000 signatures were collected. His access to Walmart's e-mail and messaging systems was temporarily suspended.
According to Refines' IBES data, US store sales that have been open for at least one year increased by 2.8% (excluding fuel) in the quarter ended July 31. Analysts estimated growth at 2.07%.
Adjusted earnings per share increased to $ 1.27 per share, exceeding expectations of $ 1.22 per share.
The retailer increased its guidance for adjusted earnings per share from a low-single-digit percentage decline to a "slight decline to a slight increase". This forecast includes the effect of the acquisition of the Indian e-commerce company Flipkart.
Online revenue increased 37%, in line with quarter-on-quarter growth, exceeding the company's expectations of 35%.
Walmart's online expansion has had a negative impact on profitability, and losses in the US ecommerce business could be estimated at $ 1.4 billion in 2018, up from $ 1.4 billion this year Dollars rise Morgan Stanley (NYSE :).
Walmart intends to sell ModCloth, the women's apparel website acquired two years ago, to offset losses in the online business.
Total revenue increased 1.8% to $ 130.4 billion, outstripping analyst estimates of $ 130.1 billion.