Top line to improve
Analysts expect Walmart (WMT) to report sales of $117.8 billion in fiscal 1Q18, representing an improvement of 1.7% compared to fiscal 1Q17. Its top line is expected to benefit from strategic investments in the past couple of years to revamp its operations aimed at driving store traffic and boosting online sales. In comparison, analysts expect rival Target (TGT) to post tepid sales in 1Q17, reflecting weak traffic.
What could drive top-line growth?
Walmart has been investing in enhancing the consumer shopping experience through store remodeling, beefed up e-commerce offerings, and lower pricing. These factors are expected to boost sales in the coming quarters. The company remains upbeat and projects net sales to improve 2.0%–3.0% in fiscal 2018, driven by growth across its stores and digital business.
With consumers shifting to online shopping and Amazon (AMZN) making serious inroads, Walmart has taken several strategic measures to ramp up its e-commerce offerings. That has resulted in improved top-line performance. Recently, the company introduced pickup discounts. It offers an additional discount to online-only products if shoppers pick up their orders at a nearby Walmart store.
Also, in the past year, the company made a series of strategic acquisitions to enhance its expertise in diverse product categories and expand its digital offerings. It already offers online grocery pickup services in more than 600 stores and remains on track to expand it to another 500 locations in the current fiscal year. Walmart offers free two-day delivery on orders of more than $35. It has also invested in China’s (FXI) JD.com (JD), which will further strengthen its online sales.
However, adverse currency movement, a softness in the United Kingdom, deflation in the food category, and a strategic decision to invest in price are expected to be a drag in the near term.