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Walmart Takes on Amazon by Matching Online Prices

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Inside A Wal-Mart Super Store Ahead Of Black Friday
Patrick T. Fallon/Bloomberg via Getty Images
By ANNE D'INNOCENZIO

NEW YORK -- Walmart Stores (WMT) on Thursday announced an aggressive holiday plan that includes free shipping on the top 100 items and price cuts on 20,000 items, in a bid to win its share of holiday dollars.

Starting Friday, Walmart will start to match online prices such as Amazon.com's (AMZN) in its stores. Managers of half of its stores were already doing that, but now it's become an official policy.

"Being the price leader is an ongoing priority for us and a commitment to our business," said Doug McMillon, who took over as CEO in February. "And with every year, that is even more important during the holiday season."

He added that while he's encouraged by the sales increase at its Walmart stores, he's still not satisfied with the performance.

"We need to continue to improve the customer experience, both in our stores and online, to deliver stronger sales growth and strength our bottom line performance," McMillon said in a transcript of a prerecorded call to investors.

Sales Perk Up

Walmart eked out a rare gain in an important sales measurement during the third quarter as it reported profits that beat Wall Street expectations.

But the world's largest retailer issued a fourth-quarter profit outlook that missed Wall Street expectations because of expected fierce holiday discounting. The quarter also marked two full years of traffic declines at U.S. Walmart stores.

Macy's (M), J.C. Penney (JCP) and Kohl's (KSS) all reported results this week that show middle-income shoppers remain cautious heading into the holiday shopping season.

Walmart itself is a barometer of consumer spending, and its challenges reflect the struggles of its low-income shoppers, who are being squeezed by stagnant wages and reduced government food stamps. But Walmart sees potential help: Lower gas prices that could put more money into shoppers' pockets.

Revenues Rise

Walmart reported earnings of $3.71 billion, or $1.15 a share, for the three months that ended Oct. 31.

The company, which is based in Bentonville, Arkansas, posted revenue of $119 billion in the period, beating Wall Street forecasts. Analysts expected $118.35 billion, according to Zacks.

Walmart's U.S. discount division posted a 0.5 percent increase in revenue at stores open at least a year. That was the first increase in seven quarters.

Its smaller Neighborhood Markets, which cater to shoppers looking for more convenience and offer groceries, fresh produce and beauty items, had a 5.5 percent increase in revenue at stores open at least a year.

During a call with reporters Thursday, Walmart Chief Financial Officer Charles Holley said Walmart is already seeing some benefit from lower gas prices, which are translating into improved customer traffic in stores. "We all know it can help the average consumer," he said.

The average gasoline price in the U.S. has fallen for 48 straight days, according to AAA. Drivers are now paying $2.92 a gallon on average.

Ken Perkins, president of RetailMetrics, believes it will take until December for Walmart and other stores to really benefit from the money saved.

Walmart said that it expects fourth-quarter earnings a share to range between $1.46 and $1.56, which includes the negative impact of closing underperforming stores in Japan. Analysts had expected $1.57 a share.

The company expects full-year earnings to be $4.92 to $5.02 a share. Analysts had expected $4.99, according to FactSet.

Shares of Walmart rose nearly 3 percent, or $42.54 to $81.74 in morning trading.

 

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