Wal-Mart Draws More Shoppers, Raises Fiscal-Year Outlook

Wal-Mart Stores Inc reported higher-than-expected quarterly earnings on Thursday, saying an improved shopping experience stemming from employee wage increases helped draw more customers to its stores.

The world's largest retailer also raised its fiscal-year profit forecast, sending its shares up nearly 2 per cent.

For the second quarter in a row, the company bucked a string of weak results from higher-end brick-and-mortar competitors like Target Corp, Macy's Inc and Kohls Corp. Target cut its fiscal-year profit outlook on Wednesday after quarterly sales fell more than expected.

Wal-Mart U.S. Chief Executive Officer Greg Foran said on a conference call that the company's customers were still cautious with their spending but were visiting stores more often and buying more items. Store visits increased 1.2 per cent, and the average size of an order rose 0.4 per cent during the second quarter ended on July 31.

"We are seeing a steady improvement in the U.S. business, and it is responding favorably to the changes we are making," he said.

Wal-Mart has been spending heavily to get customers back and improve stock in stores. Earlier this year, it increased entry-level wages to $10 an hour and said it would invest $2.7 billion in employee compensation and training over two years, a move it says has led to cleaner stores, faster checkouts and improved customer service.

"Walmart's strategic investments are generating traction, which is especially meaningful, given a large portion of its customer base remains challenged," said Moody's analyst Charlie O'Shea.

Online sales growth accelerated sequentially for the first time in five quarters, rising 11.8 per cent from 7 per cent in the first quarter on the back of investments in technology and warehouses to fulfill those orders.

Wal-Mart raised its fiscal-year earnings outlook to between $4.15 and $4.35 a share from a previous range of $4.00 to $4.30.

The forecast includes an estimated hit of 5 cents per share from the planned acquisition of internet retailer Jet.com, which Wal-Mart hopes will accelerate its e-commerce business and narrow the widening gap with rival Amazon.com Inc.

Second-quarter earnings per share came to $1.07, excluding a gain from the sale of Wal-Mart's e-commerce business in China and other items. Analysts on average were expecting $1.02, according to Thomson Reuters I/B/E/S.

Sales at U.S. stores open at least a year beat expectations and rose 1.6 per cent, excluding fuel prices.

Revenue rose 0.5 per cent to $120.9 billion. International sales fell 6.6 per cent to $28.6 billion but increased 2.2 per cent on a currency-neutral basis.

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