Wal-Mart calls for 40 percent e-commerce sales growth in fiscal 2019

Key Points
  • Ahead of its annual investor day, Wal-Mart reiterates its earnings outlook for the current fiscal year.
  • The big-box retailer says it will focus on remodeling existing stores and incorporating "digital experiences."
  • Wal-Mart says it expects its U.S. e-commerce business to grow sales by roughly 40 percent in fiscal 2019.
Wal-Mart announces new $20 billion share buyback
Wal-Mart announces new $20 billion share buyback

Wal-Mart on Tuesday reiterated its earnings outlook for the current fiscal year and announced plans to add 1,000 online grocery pickup locations at its U.S. stores in fiscal 2019.

Wal-Mart also unveiled a $20 billion share repurchase program to replace its existing plan, announced in October 2015. The new authorization will be used over a two-year period, the company said.

Wal-Mart shares were climbing more than 3.5 percent on the news. The stock was trading on pace for its best day since May 2016, when shares jumped nearly 10 percent.

The big-box retailer explained it will continue to focus on remodeling existing stores and incorporating "digital experiences" in place of building new locations.

Ahead of its annual investor day in Bentonville, Arkansas, Wal-Mart said it expects its U.S. e-commerce business to grow sales by roughly 40 percent in fiscal 2019. Online transactions surged 60 percent during the second quarter of this year, .

"We have good momentum in the business, we're executing our strategy and moving with speed to win with the customer, who is more connected than ever and embracing tools that will save them both time and money," CEO Doug McMillon said in prepared remarks.

"We're combining the accessibility of our stores with e-commerce to provide new and exciting ways for customers to shop," he added.

The company still expects adjusted earnings per share for the fiscal year 2018 to fall between $4.30 and $4.40.

For the fiscal year 2019, which ends in January 2019, Wal-Mart said it expects earnings to increase about 5 percent year over year. Net sales for fiscal 2019 are expected to grow close to 3 percent, driven by same-store and e-commerce sales growth, the company added.

In fiscal 2019, across the U.S. Walmart will open fewer than 15 Supercenters and fewer than 10 of its Neighborhood Markets. At last year's investor day, Wal-Mart announced a similar plan to scale back store openings.

"It is clear that Walmart intends to continue to turn up the heat online," said Charlie O'Shea, a retail analyst with Moody's.

"We still believe Amazon's lead in online retail is insurmountable, however Walmart continues to widen the gap between itself and all other brick-and-mortar retailers by leveraging its unmatched physical resources, including stores and supply chain, and in the process is providing consumers with a compelling online alternative to Amazon," O'Shea wrote in a note to clients.

The addition of 1,000 grocery pick-up locations should aid Wal-Mart in maintaining its leading position in the U.S. grocery industry, he added.

Just last month, Wal-Mart announced it was planning its 1,000th online grocery pickup location in Amazon's backyard of Seattle. In buying Whole Foods, e-commerce giant Amazon has been focused on slashing prices across those supermarket stores, creeping into Wal-Mart's Everyday Low Prices territory.

For fiscal years 2018 and 2019 combined, Wal-Mart is calling for capital expenditures to be about $11 billion, with e-commerce investments going toward enhancing the retailer's supply chain. Wal-Mart's international business will also invest more in fulfillment capabilities, the company said.

"Our financial position is strong, which allows us to invest in the business while returning significant cash to shareholders," CFO Brett Biggs said in prepared remarks.

Some of Wal-Mart's latest efforts to get purchases more quickly to customers include testing an employee delivery program. The retailer is also piloting a push in its same-day service in certain markets, while retail rival Target has landed a partnership to do so.

Roughly one year ago, Wal-Mart purchased e-retailer, bringing the website's founder, Marc Lore, to its team. Wal-Mart's e-commerce growth has been accelerating ever since.

Wal-Mart then announced a partnership with Google in August, opting to work with Google parent Alphabet in a voice-assistant battle against Amazon and Alexa. Wal-Mart customers can now shop via Google Assistant, along with Google Express and its app.

As of Monday's market close, Wal-Mart shares have risen more than 16 percent in 2017.

WATCH: Wal-Mart analyst day kicks off

Wal-mart analyst day kicks off
Wal-mart analyst day kicks off