October 10, 2017 / 11:41 AM / in 6 months

Wal-Mart sees 40 percent online sales growth next year, shares rise

(Reuters) - Wal-Mart Stores Inc (WMT.N) on Tuesday forecast a 40 percent rise in U.S. online sales next year as it ramps up competition with Amazon.com Inc (AMZN.O), boosting shares of world’s biggest brick-and-mortar retailer to the highest in more than two years.

Wal-Mart also forecast overall net sales would rise by at least 3 percent in the year ending January 2019, and said it would buy back $20 billion of its shares over the next two years.

Wal-Mart shares rose 4.5 percent to close at $84.13, the top driver of gains in the Dow Jones Industrial Average .DJI and S&P 500 index .SPX.

“We are going to lean into places like technology, e-commerce, international stores,” Wal-Mart Chief Financial Officer Brett Biggs said at the Bentonville, Arkansas company’s annual investor meeting which was webcast.

Wal-Mart, which is battling Amazon for market share, has been investing in its online business and letting customers pick up online orders at its 4,700-plus stores.

The company has already started offering free two-day shipping and said on Tuesday it planned to roughly double the locations for shipping online grocery orders. On Monday, it said it would speed up the process for in-store returns of items bought on its website.

Wal-Mart, which expects online sales to hit about $11.5 billion for the fiscal year ending January 2018, did not break out U.S. e-commerce sales last year. It reported growth of about 62 percent for the first half of fiscal 2018, up from 12 percent in the year-ago period.

With a steady rise in online shopping, Wal-Mart’s e-commerce sales growth has been outstripping brick-and-mortar, leading the company to slash new store openings.

FILE PHOTO - Souvenir t-shirts are seen for sale at the Wal-Mart Neighborhood Market in Bentonville, Arkansas, U.S. on June 4, 2015. REUTERS/Rick Wilking/File Photo

The company plans to open fewer than 15 supercenters and less than 10 neighborhood markets in the United States in fiscal 2019, it said in a statement on Tuesday. That is half the stores it intends to open in fiscal 2018.

“Digital has been a recent highlight for WMT and it expects this momentum to carry into FY ‘19,” UBS said in a note. “Faster growth in (e-commerce) should lead to earnings pressure though, as this operation is likely still several years away from profitability.”

In August, Wal-Mart warned that current-quarter profit could miss market estimates as margins are hurt by price-cutting and heavy spending on e-commerce.

The company on Tuesday estimated capital expenditures of about $11 billion for fiscal 2018 and 2019.

Grocery competition has increased since Amazon bought Whole Foods and started to cut prices at the upmarket grocer in August.

Wal-Mart forecast fiscal 2019 profit would increase about 5 percent over its expected adjusted earnings of $4.30 to $4.40 per share for the year ending January 2018.

    The new buyback replaces the existing $20 billion program announced in October 2015. In the seven quarters since, Wal-Mart had bought back $15.10 billion worth of shares.

    Reporting by Sruthi Ramakrishnan in Bengaluru and Sayantani Ghosh in New York; Additional reporting by Dan Burns in New York; Editing by Jeffrey Benkoe and Richard Chang

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