Dive Brief:
- Wal-Mart Stores reported a lower-than-expected profit during its second quarter earnings on Tuesday and lowered its full-year forecast, citing investments in its workforce and e-commerce.
- Profit for the retail giant fell from $4.09 billion in Q2 2014 to $3.48 billion in Q2 2015.
- Total revenue for the company was $120.2 billion, with comparable sales in the U.S. up 1.5%.
Dive Insight:
Even with a stunted profit, the investments Wal-Mart is making in its employees, e-commerce, and even smaller Neighborhood Market stores seem to be paying off. While the company said that its February decision to raise the wages of half a million workers cut into its overall profit, CEO Doug McMillon said in an earnings call that he was "confident" that these investments are leading to a better customer experience and, in turn, positive comparable sales in U.S. stores.
Besides its investment in wages, Wal-Mart hasn't been shy about growing its e-commerce business, which some see as a response to the growing popularity of Amazon (or at least its Prime membership), and small-format Neighborhood Market stores. Online sales, excluding currency impacts, grew 16% in the quarter, while sales at Neighborhood Market stores increased 7.3% in the quarter, thanks in part to new stores.
Still, even with encouraging numbers in the areas that Wal-Mart targeted for growth, McMillon still acknowledged that the company has some work to do in managing expenses in the last half of the year.
"Although we grew top line sales, we did fall short on managing the bottom line," McMillon said on Tuesday's earnings call. "During the quarter, operating expenses were higher than expected and our gross margin was lower than planned. We are not pleased or satisfied. For the back half of the year, we will manage these items closely with a continued commitment to efficiency, cutting costs where appropriate, even in a period of investment."
