• EPS misses Wall Street forecasts
  • Net sales up but comp sales fall in US
  • Wal-Mart targets up to 2% increase in Q2 US comp sales 
Wal-Mart saw comp sales in US fall in Q1

Wal-Mart saw comp sales in US fall in Q1

Shares in Wal-Mart were down today (16 May) after the world's largest retailer posted quarterly earnings that missed Wall Street forecasts - and booked lower US sales.

Wal-Mart reported diluted earnings per share of $1.14 for the quarter to 30 April, a 4.6% rise on the year. However, according to a poll of analysts by Thomson Reuters, Wall Street has forecast EPS of $1.15.

Operating income was up 1.1% at $6.5bn. Net sales increased 1% to $113.4bn. Nevertheless, underlying sales in the US fell. Wal-Mart booked a 1.4% drop in comparable-store sales in the US, citing a delay in consumers receiving tax rebates, "challenging weather conditions" and lower-than-expected grocery inflation.

The retailer said it expects comp sales from its US business to be at worst flat year-on-year or up 2% at best in the second quarter.

Internationally, Wal-Mart's sales outside the US were up 2.9% at $33bn. It claimed it had gained market share in the "majority" of its non-US markets.

Shares in Wal-Mart were down 1.14% at $78.72 at 09:52 ET.

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  • Wal-Mart Stores, Inc. (Walmart) reported first quarter diluted earnings per share (EPS) of $1.14, a 4.6 percent increase compared to last year's first quarter EPS of$1.09.
  • Walmart U.S. and Sam's Club, excluding fuel, expect to increase comps for the Q2 13-week period to between flat and 2 percent and 1 and 3 percent, respectively.
  • The company expects to deliver EPS for Q2 between $1.22 and $1.27, compared to $1.18 last year.
  • Walmart U.S. comp sales declined 1.4 percent in the 13-week period from Jan. 26 to Apr. 26, 2013. Comp sales performance was impacted by a delay in income tax refund checks, challenging weather conditions, less grocery inflation than expected and the payroll tax increase. Walmart U.S. gained market share1 in the measured category of "food, consumables and health & wellness/OTC."
  • Walmart International grew net sales 2.9 percent to $33.0 billion. On a constant currency basis2, Walmart International's net sales would have increased 5.4 percent to $33.8 billion. Walmart International gained market share3 in a majority of the countries in which we operate.
  • Comp sales, without fuel, at Sam's Club were up 0.2 percent during the period, pressured by softer business member traffic, weather and lower than expected inflation.
  • Consolidated net sales reached $113.4 billion, an increase of $1.2 billion, or 1.0 percent. Currency exchange rate fluctuations had a negative impact on net sales of$1.0 billion.
  • Consolidated operating income was $6.5 billion, an increase of 1.1 percent over last year. Walmart U.S. and Sam's Club grew operating income 5.9 percent and 7.4 percent, respectively.
  • Walmart reported free cash flow2 of $1.9 billion for the quarter ended Apr. 30, 2013.
  • The company returned $3.8 billion to shareholders through dividends and share repurchases in the first quarter.

1 Sources: The Nielsen Company, 13 weeks ended Apr. 27, 2013.

2 See additional information at the end of this release regarding non-GAAP financial measures.

3 Sources: Africa: Statistics South Africa, Argentina: The Nielsen Company, Canada: The Nielsen Company, Central America:The Nielsen Company, Chile: National Statistics Institute (INE), China: National Bureau of Statistics of China (NBSC), Japan:Ministry of Economy, Trade and Industry (METI).

 

BENTONVILLE, Ark.--(BUSINESS WIRE)--May. 16, 2013-- Wal-Mart Stores, Inc. (NYSE: WMT) today reported financial results for the first quarter ended April 30, 2013.

Net sales for the first quarter were $113.4 billion, an increase of 1.0 percent over last year. Net sales last year benefited by 1.0 percent from the extra day due to leap year. On a constant currency basis1, net sales would have increased 1.8 percent to$114.2 billion. Membership and other income increased 1.6 percent versus last year, due primarily to an increase in membership income. Total revenue for the first quarter was $114.2 billion, a 1.0 percent increase over last year.

Consolidated net income attributable to Walmart for the first quarter was $3.8 billion, up 1.1 percent. Diluted earnings per share attributable to Walmart (EPS) were $1.14, a 4.6 percent increase, compared to $1.09 last year.

Solid earnings performance

"In a quarter marked by considerable headwinds to top line sales, Walmart delivered solid EPS growth of 4.6 percent," said Mike Duke, Wal-Mart Stores, Inc. president and chief executive officer. "Walmart's mission is simple and focused -- to help people save money so they can live better. When we simplify and focus our execution against this mission, it's easy for our associates to prioritize what they have to do to serve our customers.

"I'm confident about our long-term strategy and the direction Walmart is headed," Duke added. "Our expectations about our U.S. businesses' performance, coupled with more discipline in International, will allow us to improve our performance throughout the year."

Duke also noted that e-commerce sales grew more than 30 percent in the first quarter versus last year.

"There is no doubt that our company is making the right investments in e-commerce to differentiate ourselves and become a better Walmart," said Duke. "And with our sales growth in the first quarter, we believe our investments are paying off."

Leverage

The company's operating expense leverage was relatively flat for the first quarter, but the commitment to leverage for the full year remains a priority.

"We are proud that our U.S. segments leveraged operating expenses in the first quarter, and we expect them to continue leveraging," said Duke. "To operate in a difficult sales environment requires disciplined expense and productivity management, the core of EDLC and EDLP. We are committed to have the total company achieve expense leverage for the year."

"Although we believe our company will leverage expenses for the year, the second quarter will be challenging, given expense pressures in International and our corporate area," said Charles Holley, executive vice president and chief financial officer. "Expense leverage may not be delivered evenly across the quarters, but we believe that by executing our plans, we will continue to reduce expenses and improve productivity."

See additional information at the end of this release regarding non-GAAP financial measures

Strong returns

"We deployed cash to grow our business and return value to shareholders," said Holley. "Despite the multiple headwinds during the quarter, we grew operating profits ahead of sales growth. Our balance sheet is strong, and we continue to grow."

During the first quarter, the company repurchased approximately 30 million shares for $2.2 billion. In addition, the company paid$1.6 billion in dividends. As previously announced, the company increased its dividend by 18 percent for fiscal 2014 to $1.88 per share.

Return on investment1 (ROI) for the trailing 12 months ended April 30, 2013 was 17.8 percent, compared to 18.1 percent for the prior trailing 12 months ended April 30, 2012. The decline was primarily the result of acquisitions, along with an increase in fixed assets within Walmart's base business.

Walmart ended the quarter with free cash flow1 of $1.9 billion, compared to $3.1 billion in the prior year. An increase in income tax payments due primarily to changes in federal bonus depreciation rules and an increase in capital expenditures contributed to the free cash flow decline.

EPS Guidance

"Given current business and economic trends, including currency, we expect second quarter EPS to be in the range of $1.22 to $1.27," said Holley. "Investments in Global eCommerce initiatives were forecast to have an incremental $0.09 impact for fiscal 2014, and this remains in our guidance. We expect the Q2 impact to be in line with the $0.02 per share we had in the first quarter. In addition to eCommerce initiatives, expenses related to FCPA matters are expected to range from $65 to $70 millionfor the second quarter."

Last year, Walmart delivered $1.18 in EPS for the second quarter.

Net sales results

Net sales, including fuel, were as follows:

          Three Months Ended  
          April 30,  
(dollars in billions)         2013     2012    

Percent
Change

Walmart U.S.         $ 66.553       $ 66.333       0.3 %
Walmart International         33.005       32.077       2.9 %
Sam's Club         13.871       13.854       0.1 %
Consolidated         $ 113.429       $ 112.264       1.0 %

The following explanations provide additional context to the above table.

  • Last year's net sales included an extra day for leap year, which added approximately 1.0 percent growth in the first quarter of last year.
  • On a constant currency basis,1 Walmart International's net sales would have been $33.8 billion, an increase of 5.4 percent over last year.
  • Net sales for Sam's Club, excluding fuel, were $12.2 billion, an increase of 0.5 percent from last year.

See additional information at the end of this release regarding non-GAAP financial measures.

  • Consolidated net sales, on a constant currency basis,1 would have increased 1.8 percent to $114.2 billion.

"On a constant currency basis,1 Walmart International's first quarter sales were $33.8 billion, up 5.4 percent. Our stores in theU.K., Africa, Mexico, Central America, Brazil, Chile, Argentina, China and India delivered positive comp sales," said Doug McMillon, Walmart International president and CEO. "Comps in Canada and Japan declined. We grew our share2 in seven of our eleven markets."

Segment operating income

Segment operating income was as follows:

          Three Months Ended  
          April 30,  
(dollars in billions)         2013     2012    

Percent
Change

 
Walmart U.S.         $ 5.329       $ 5.033       5.9 %
Walmart International         1.256       1.318      

-4.7

%

Sam's Club         0.525       0.489       7.4 %
Sam's Club (excluding fuel)         0.519       0.487       6.6 %
U.S. comparable store sales review and guidance

The company reported U.S. comparable store sales based on its 13-week retail calendar for the periods ended April 26, 2013and April 27, 2012 as follows:

          Without Fuel       With Fuel       Fuel Impact
          Thirteen Weeks Ended       Thirteen Weeks Ended       Thirteen Weeks Ended
          4/26/2013       4/27/2012       4/26/2013       4/27/2012       4/26/2013       4/27/2012
Walmart U.S.         -1.4%       2.6%       -1.4%       2.6%       0.0%       0.0%
Sam's Club         0.2%       5.3%       -0.2%       6.2%       -0.4%       0.9%
Total U.S.         -1.2%       3.0%       -1.2%       3.2%       0.0%       0.2%

During the 13-week period, the Walmart U.S. comp was negatively impacted by a delay in tax refund checks, challenging weather conditions, less grocery inflation than expected and the payroll tax increase. Comp traffic was down 1.8 percent, while average ticket increased 0.4 percent.

"Despite comps being lower than expected, we continued to generate market share gains," said Bill Simon, Walmart U.S. president and CEO. "According to The Nielsen Company, we gained 20 basis points of market sharein the measured category of 'food, consumables and health & wellness/OTC' during the 13-weeks ended Apr. 27, 2013."

For the 13-week period ending Jul. 26, Walmart U.S. expects comp store sales to increase from flat to 2.0 percent. Last year, Walmart's comp sales rose 2.2 percent for the comparable period.

See additional information at the end of this release regarding non-GAAP financial measures.

2 Sources: Africa: Statistics South Africa, Argentina: The Nielsen Company, Canada: The Nielsen Company, Central America:The Nielsen Company, Chile: National Statistics Institute (INE), China: National Bureau of Statistics of China (NBSC), Japan:Ministry of Economy, Trade and Industry (METI).

Sources: The Nielsen Company, 13 weeks ended Apr. 27, 2013.

"The second quarter is off to a good start, with positive comps," Simon said. "We continue to believe in the strength of our strategic plan to deliver a broad assortment with EDLP. We also continue to monitor the impact of the 2 percent payroll tax increase, along with other factors, like fuel prices."

In the first quarter, Sam's Club comp traffic was up 1.3 percent, while ticket was down 1.1 percent for the 13-week period endedApr. 26.

"Comp sales for the first quarter were impacted by unfavorable weather and less than expected inflation," said Rosalind Brewer,Sam's Club president and CEO. "Our business member is an integral part of our business, and comp sales and traffic patterns indicated that they remained pressured in the first quarter. Small business optimism remains at historically low levels, as businesses adapt to higher payroll taxes and cautious consumers."

As of May 15, Sam's Club increased its membership fee to $45 nationwide for both Advantage and Business base memberships, reflecting a $5 and $10 increase, respectively. The fee for Plus membership remains $100. This is Sam's Club'sfirst fee increase since Jan. 2006.

"The combination of our strategies, including our membership fee increase, positions us well for the second quarter, and we have a number of events to drive sales," said Brewer. "Members will experience exciting merchandise, heightened by local brands, all displayed with a new level of visual excitement."

Sam's Club expects comp sales, excluding fuel, for the current 13-week period ending Jul. 26, 2013, to increase from 1.0 to 3.0 percent. Last year, for the 13-week period, comp sales, excluding fuel, increased 4.2 percent.

Walmart U.S. and Sam's Club will report comparable sales for the 13-week period ending Jul. 26 on Aug. 15, when the company reports second quarter results. For fiscal year 2014, Walmart will report comparable store sales on a 53-week basis, with 4-5-5 week reporting for the fourth quarter.

 

Original source: Wal-Mart Stores