Kudos to Walmart.
Wait, what? I know, I don't give the world's largest retailer praise lightly. Over the years, I've belabored its slow-going approach to driving web sales. How it shrugged its shoulders as consumers shifted online and away from its cavernous supercenters. How it let Amazon have free rein over online commerce as it posted its first-ever annual revenue decline last year, and its dropped promise of steady profit growth as it figures out how to streamline its business. Even Warren Buffett -- once a staunch Walmart supporter -- has been dumping shares.
But on Thursday the company ratcheted up its expectations for its full-year earnings growth after its second-quarter financial results surpassed forecasts. Its shares rose as much as 3 percent and are up 22 percent year to date --marking a reversal from the nearly 30 percent decline in 2015. Walmart's online sales growth started climbing again, and executives struck a positive tone about how its efforts to pay its workers more and push down prices at its stores were attracting more shoppers.
Although there are still mounting troubles in Walmart's U.K. operations, its U.S. stores notched their eighth consecutive quarter of positive sales growth, standing out from retailers like Target and Macy's, which lament stagnating sales and the increasing tendency for consumers to be persnickety with where they spend their money.
The last time Walmart's U.S. stores were able to squeeze out eight consecutive quarters of sales growth was from June 2007 through March 2009, when the country suffered its worst financial crisis since the Great Depression and shoppers flocked to Walmart to pinch pennies. Nine quarters of declines followed, though, as the economy went on the mend and consumers felt more comfortable spending again.
So the pessimist in me can't help but think that an environment in which Walmart, which counts more lower-income customers, is on top, and stores like Whole Foods and Starbucks, which cater to a higher-end clientele, are flailing, doesn't bode well for the greater economy. Not to mention an unfolding "restaurant recession" that has consumers cutting back on their most discretionary of purchases.
It's also worth pointing out that Walmart's upgrade of its full-year adjusted earnings per share to $4.15 to $4.35 from $4 to $4.30 doesn't look as notable when considering last year's earnings per share came in at $4.57.
But I digress. The optimist in me says Walmart's results could be early signs that the company is finally getting serious about what matters to customers right now, even if it means some short-term pain.
Now that it finally ousted its head of e-commerce as part of its $3.3 billion acquisition of online retailing upstart Jet.com in probably the world's priciest acqui-hire, maybe it can get on with the online show. Ditto for its divestment from businesses that siphon off attention and profits, like its Chinese e-commerce operation and its Walmart Express stores, a concept the company wasn't ever truly able to crack.
Still, outpacing Wall Street's expectations for one quarter does not make a turnaround. The question now is whether Walmart lets the pessimists or optimists prevail.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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