Wal-Mart Buoyed by 3Q Results
November 23, 2009,
Wal-Mart Stores Inc. exceeded its guidance in earnings per share and grew total sales during its third quarter, giving the discount department store chain reason for greater expectations into the holiday selling season.
Diluted earnings per share from continuing operations for Wal-Mart Stores’ third quarter were 84 cents versus the company’s earlier guidance of 78 cents to 82 cents. By comparison, last year in the same period Walmart earned 77 cents per share from continuing operations.
Total sales for the 13-week period, ended Oct. 30, grew by 1.1% to $98.7 billion from $97.619 billion. On a constant currency basis, which assumes currency exchange rates remained the same as the previous year, would have increased 3.8% to approximately $101.3 billion.
The company remains “encouraged by both our traffic and market share gains across the company,” said Mike Duke, president and ceo. “The sales environment continued to be difficult this quarter, but customer traffic is up throughout the company,” adding that the retailer gained market share, particularly in the United States, the United Kingdom and Mexico.”
In the Walmart U.S. division, bedding had its bright spots, noted Eduardo Castro-Wright, vice chairman.
“Customers have responded well to new brand and category launches, such as GE and Rival small appliances, and bedding from Better Homes & Gardens and Canopy,” he explained. “We continue to gain market share in the home category.”
Additionally in home, seasonal events were strong throughout the period. Dine-at-home categories, such as cooking and food preparation, continued to perform well, “while sales in discretionary departments, such as home décor, furniture and luggage remain softer than last year,” he said.
Sales at Walmart U.S. in the third quarter were $61.8 billion, up 1.2% from last year.
“Customer traffic in comp stores is up 1.5% for the reporting period. Our continued increase in comp customer traffic indicates the strength of our underlying business,” he said, adding “our operating performance was outstanding, even in an economy that remains challenging.”
Walmart U.S. saw a 6.9% increase in operating profit on a 1.2% sales increase during the third quarter. Operating income increased by 7.3% to $4.5 billion. Inventory was reduced by 6.2%, “resulting in improved gross margin, better expense control and continued strength in return on investment. Few retailers can claim this kind of operating performance,” Castro-Wright said.
Sales in the third quarter for warehouse club division Sam’s Club, excluding fuel, increased 1.3% to $10.7 billion. Including fuel, quarterly sales were $11.6 billion, representing a decline of 70 basis points, “primarily due to lower fuel sales related to lower fuel prices,” said Brian Cornell, president and ceo, Sam’s Club.
Comp club sales for the 13-week period, excluding fuel, were up 10 basis points. Including fuel, they declined 1.9%, primarily due to the average retail fuel price per gallon decreasing 28% for the third quarter compared to last year. “We expect the negative fuel sales effect to reverse course in the fourth quarter, as we cycle fuel prices that were down significantly in this period last year,” he said.
Going forward, Sam’s is “building on the momentum we saw last quarter -- upgrading and adding memberships, expanding margins through better mix, and improving operating profits and expense management,” Duke said.
The company saw strong growth in its ecommerce business, www.walmart.com, which is expanding sales at more than 20% rates year-over-year, “a faster pace than the reported online industry growth rate,” claimed Duke. “This growth reflects the response from customers to many improvements we have made to the site, as well as our vibrant site-to-store business. We anticipate strong site-to-store demand from customers during the holidays. During the quarter, 'Marketplace’ was added to the site, which increased the selection by one million products.”
He added that customers are buying from the website items such as domestics, furniture, appliances and fitness items.
Walmart International remains the company’s fastest-growing division, Duke said. While more than half of Walmart’s 13 million square footage growth this year is in the United States, “I’m particularly pleased about the role that Walmart International plays in our growth strategy.”
Comps were almost flat, down 0.4% for total U. S. operations – by segment, they were down 0.5% at Walmart U.S. and up 0.1% at Sam’s Club.
Year to date, total decreased 0.3% to $292.2 billion. At Walmart U.S., sales for the first nine months rose 1.7% to $187.3 billion, and at Sam’s Club they fell 1.8% to $34.4 billion.
Segment operating income for the nine-month period at Walmart U.S. rose 5.1% to $13.890 billion. At Sam’s Club, operating income fell 0.1% to $1.2 billion.