US: Wal-Mart raises outlook, shares slide on sales miss
Wal-Mart raises outlook
Shares in US retail giant Wal-Mart slid almost 3% in pre-open trading this morning (16 August), despite a 5.7% increase in second-quarter net income and an improved full-year outlook.
The company said today that net income in the three months to 31 July totaled US$4.02bn, up from $3.80bn in the comparable period of last year.
Net sales increased 4.5% to reach $113.5bn in the quarter. In the US, sales increased a total of 3.8% over the quarter to reach $67.3bn. US comparable-store sales rose 2.2%, its fourth consecutive quarter of positive ID sales. Meanwhile, Wal-Mart's international division recorded 6.4% growth to reach $32bn.
Wal-Mart also raised and narrowed its full-year EPS guidance range to $4.83-4.93, up from previous guidance of $4.72-4.92.
However, in pre-market trading Wal-Mart shares fell 2.17% to $72.43 because sales failed to meet street estimates, primarily due to a $2.2bn hit from currency exchange.
Janney analyst David Strasser attributed the early decline in stock price to some "profit taking" after a "strong run", which saw shares climb 25% over the past quarter.
Nevertheless, Strasser maintained that Wal-Mart stock remains an attractive option. "The capital allocation story and business momentum will give this stock legs going forward," he suggested.
Click here for just-food's more detailed examination of Wal-Mart's Q2 numbers
Walmart reports Q2 EPS of $1.18, at the top of guidance; Company raises full-year EPS guidance; Walmart U.S. delivers fourth consecutive quarter of positive compsQ2 Highlights:
- Wal-Mart Stores, Inc. (Walmart) reported second quarter diluted earnings per share from continuing operations of $1.18, at the top of our guidance of $1.13 to $1.18. This was an 8.3 percent increase from the $1.09 per share reported for the second quarter last year.
- Walmart raised and narrowed full-year EPS guidance to a range of $4.83 to $4.93, from a previous range of $4.72 to $4.92.
- Walmart U.S. comparable store sales rose 2.2 percent in the 13-week period ended July 27, with positive ticket and traffic. Walmart U.S. delivered its fourth consecutive quarter of positive comparable sales. Sam's Club comparable sales, without fuel, increased 4.2 percent for the same 13-week period.
- Walmart International grew net sales 6.4 percent. Consolidated net sales were $113.5 billion, a 4.5 percent increase over last year. Currency exchange rate fluctuations negatively impacted net sales by approximately$2.2 billion. Without the currency impact1, net sales, which include acquisitions, would have been $115.7 billion.
- The company leveraged operating expenses for the quarter. Consolidated operating income was $6.7 billion, up 4.9 percent from last year. Operating income grew faster than sales. Walmart had free cash flow1 of $6.1 billion for the six months ended July 31.
- The company returned $3.1 billion to shareholders through dividends and share repurchases. Return on investment (ROI)1 for the trailing 12 months ended July 31, 2012 was 18.1 percent.
BENTONVILLE, Ark.--(BUSINESS WIRE)--Aug. 16, 2012-- Wal-Mart Stores, Inc. (NYSE: WMT) today reported financial results for the quarter ended July 31, 2012. Net sales for the second quarter of fiscal 2013 were $113.5 billion, an increase of 4.5 percent from $108.6 billion in the second quarter last year. Net sales for this quarter included a negative currency exchange rate impact of approximately $2.2 billion. Without the currency impact, net sales would have been$115.7 billion.
Membership and other income increased 4.7 percent to $762 million. Total revenue was $114.3 billion, an increase of 4.5 percent from last year.Income from continuing operations attributable to Walmart for the quarter was $4.0 billion, up 5.7 percent from the second quarter last year. Diluted earnings per share from continuing operations attributable to Walmart (EPS) for the second quarter of fiscal 2013 were $1.18. By comparison, last year's reported EPS were $1.09. The company had several items last year that negatively impacted the second quarter by approximately $0.03 per share.
Strong earnings performance
"Walmart had a strong second quarter, and I'm pleased with the earnings and overall results," said Mike Duke, Wal-Mart Stores, Inc. president and chief executive officer. "We had positive comp sales in Walmart U.S. and Sam's Club, as well as each of our International markets, reinforcing that customers rely on Walmart to help them save money and live better."The company leveraged operating expenses for the second quarter, delivering on its commitment to reduce costs, improve productivity and invest in price."Our intense focus on delivering productivity initiatives and reducing costs allowed us to invest in lower prices for our customers and to deliver strong profitability for shareholders," said Duke, who also highlighted the successful performance of the company's three operating segments.
"I'm really pleased with the continued momentum in our Walmart U.S. stores, evidenced, in part, by three consecutive quarters of positive comp traffic and four straight quarters of positive comp sales," Duke added. "The team is very focused on delivering broad assortment and price leadership. Walmart's low prices drive greater customer loyalty."Sam's Club had strong comp sales for the quarter. The quality and innovation behind merchandising and services are contributing to strong comps," said Duke.
"The result of Sam's initiatives is greater value, which helps attract new members and strong renewals. We are also pleased with the sales and profitability of Walmart International," Duke said. "Our goal is to achieve more balance between profitability and returns, and we will do that by improving operational and sales productivity."
Duke also commented on the economic challenges facing customers."The paycheck cycle remains pronounced in the United States and in our International markets," Duke said. "Given continuing economic pressures, we believe that our price leadership and value are growing in importance to customers across income levels."
Walmart delivered free cash flow of $6.1 billion for the six months ended July 31, 2012, compared to $4.0 billion the previous year. Return on investment (ROI) for the trailing 12 months ended July 31, 2012 was 18.1 percent, compared to 18.4 percent for the prior period. The decline in ROI is attributable to higher levels of average working capital, capital expenditures and the impact of acquisitions.
"We remain committed to providing strong returns to our shareholders," said Charles Holley, executive vice president and chief financial officer. "Walmart returned $3.1 billion to shareholders in the quarter, which included $1.3 billion in dividends and $1.8 billion in share repurchases."
Company raises full-year EPS guidance
"We take a variety of factors including sales trends, the global economy and currency into account in providing our EPS guidance. We expect third quarter fiscal 2013 diluted earnings per share from continuing operations to range between $1.04 and $1.09. This compares to last year's third quarter reported EPS of $0.97," said Holley. "We are raising and narrowing the company's full-year EPS guidance to a range of $4.83 to $4.93. Our previous range was $4.72 to $4.92. Last year's full-year EPS was $4.54."
Operating segment details and analysis
Constant currency1 consolidated net sales would have increased by 4.7 percent to$113.8 billion during the second quarter. Walmart International reported net sales of $32.0 billion for the quarter. On a constant currency1 basis, net sales would have increased 7.2 percent to $32.3 billion. Net sales for Sam's Club, excluding fuel, were $12.5 billion, an increase of 4.6 percent from last year's second quarter results. Sam's membership and other income for the second quarter increased 4.6 percent over last year.
Segment operating income
Consolidated operating income, which includes unallocated other, was $6.7 billion, up 4.9 percent from last year. On a constant currency1 basis, consolidated operating income would have risen 6.4 percent to $6.8 billion. Walmart U.S. operating income grew 5.3 percent for the quarter, outpacing net sales growth of 3.8 percent for the same period. Walmart International's reported operating income increased 5.4 percent to $1.5 billionfor the quarter. Constant currency1 operating income would have increased 11.9 percent to $1.6 billion for the second quarter. Currency exchange rate fluctuations negatively impacted operating income by approximately $110 million. Sam's Club operating income for the second quarter increased 10.1 percent. Excluding fuel, operating income for the second quarter increased 10.8 percent compared to the same period last year.U.S. comparable store sales review and guidance
During the 13-week period, both comp ticket and traffic rose for Walmart U.S., and both grocery and general merchandise had positive comp sales."Our comp sales momentum continued through the second quarter, with July being one of our strongest months. All three geographic business units and all store formats had positive comp sales. Customers are responding to our continued focus on providing the right assortment at everyday low prices and are shopping the entire store," said Bill Simon, Walmart U.S. president and chief executive officer. "We have a powerful strategy and I'm confident in our ability to deliver sustained strong financial performance."
For the 4-5-4 period from July 28 through October 26, Walmart U.S. expects comparable store sales to range from 1.0 percent to 3.0 percent. The Walmart U.S. 13-week comp for last year's third quarter rose 1.3 percent.
For Sam's Club, comparable traffic and ticket, excluding fuel, increased for both Business and Advantage members for the 13-week period ended July 27.
"Sam's Club had another impressive quarter, with positive comp sales from both Business and Advantage members. We believe that the improvements in our quality and overall merchandise offerings are key to driving these results," said Rosalind Brewer, Sam's Club president and chief executive officer. "Member engagement scores continue to achieve record levels, and we're investing in price to deliver greater value to our members."
Sam's Club expects comp sales, without fuel, for the current 13-week period, to increase between 3.0 percent and 5.0 percent. Last year, Sam's Club comp, without fuel, for the third quarter comparable 13-week period rose 5.7 percent.Both Walmart U.S. and Sam's Club will report comparable sales for the 13-week period onNovember 15, when the company reports third quarter results.
Original source: Wal-Mart
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