Walmart Q1 Better than Expected, Sales Up at U.S. Stores

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Bentonville, AR—Walmart today reported a better-than-expected first quarter as its U.S. division, its largest, continued to rebound with another comparable store sales increase.

For the quarter ended April 30, Walmart posted a 10% increase in its net profit to $3.74 billion, or $1.09 a share, compared with $3.40 billion, or 97 cents a share a year ago. quarter.

Total net revenue was up 8.6% to $112.3 billion, which included a negative currency exchange rate impact of $800 million. Walmart International continued to show the biggest sales gain, rising 15% to $32.1 billion.

The earnings beat analysts’ average estimate for $1.04 a share on sales of $110.54 billion.

Walmart U.S. posted a comparable store sales increase of 2.6% thanks to a higher traffic and higher average tickets, the company said. Sam’s Club, the wholesale club division, reported a 5.3% increase in comparable store sales.

“Despite a negative impact from currency, we grew sales and operating profit over last year,” Walmart CEO Mike Duke said. “In a highly competitive retail environment, Walmart U.S. is increasing price separation across categories and driving increased traffic to both the grocery and general merchandise areas of our stores.”

The numbers seem to confirm that Walmart’s investment in its everyday low price strategy and basics is working. The company said both traffic and transaction amount rose at Walmart U.S. during the quarter and all merchandise categories, except entertainment products, had comp sales growth.

‘Strategy for U.S. Stores is Working’

Noting that today’s report is the third straight comparable sales gain for Walmart U.S., Bill Simon, its president/ceo, said: “Our strategy is clear. Our merchants are focused on increasing sales through the right assortment at the right time and for the lowest price. We will continue to invest in price to lower costs for our customers by enhancing leverage initiatives and managing expenses.”

Walmart said it expects Walmart U.S. to have a comp sales gain of 1% to 3% in the second quarter. The company expects second quarter earnings of $1.13 to $1.18 a share. Analysts’ average estimate expects $1.16 a share.

“The turnaround they initiated several quarters ago is starting to show some benefit, it’s starting to gain traction,” said Walter Stackow, a senior research analyst at Manning & Napier. “But at the end of the day it is still a very challenging backdrop for them.”

Stackow noted that Walmart’s core consumers are still suffering from the economy as Walmart U.S. faces strong competition from dollar stores and online retailers like Amazon.

Walmart also seemed to distance itself from bribery allegations relating to its Walmart de Mexico division that surfaced in April. With federal investigations pending, Walmart’s stock took a hit since if the allegations prove true, the world’s largest retailer could receive a substantial fine.

Ironically Mexico, along with Brazil and the United Kingdom, had a strongest overall sales growth during the quarter.

“Walmart International delivered strong sales growth in the first quarter and operating income grew faster than sales, increasing more than 20%,” said Duke. “We are very focused on improving profitability and returns, and with greater transitions to everyday low price in more markets, we have stronger customer traffic, which contributed to net sales growth.”

 

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