Walmart Q3 Profit Up 9%, But Sales, Q4 Forecast Miss

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Bentonville, AR—Walmart reported today that its third quarter profit increased 9% but the world’s largest retailer’s sales and fourth quarter/holiday guidance trailed analysts’ estimates.

For the quarter ended Oct. 26, Walmart posted net income of $3.64 billion, or $1.08 a share, compared with earnings of $3.34 billion, or 96 cents a share, a year ago.

Net revenue increased 3.4% to $113.9 billion. Excluding fuel, Walmart booked company-wide U.S. comparable store sales growth of 1.7%. Operating margins inched up to 5.4% from 5.3%.

While analysts’ average estimate expected third quarter earnings of $1.07 a share, they expected an even stronger quarter in sales: $114.96 billion with comp store sales rising 4.6%. Retail analysts pay close attention to Walmart sales, which account for about 10% of all gross retail revenue (excluding autos).

“We again delivered strong sales across the business, adding $2.3 billion in revenue. Comp sales increased 1.5% this quarter, as we lapped a 1.3% comp last year,” said Bill Simon, ceo/president of Walmart U.S.

“We’re excited about the fourth quarter. November sales started ahead of plan. Our Black Friday plans are innovative and designed to drive additional traffic in our stores. We expect strong performance through Thanksgiving weekend,” Simon added.

At its Sam’s Club division, sales were up 4.7% to $13.9 billion with comp store sales rising 2.7%. The International division posted a 2.4% increase in sales to $33.15 billion.

‘Price the Major Factor for U.S. Shoppers Over Holidays’

“We gained market share in almost all of our markets, indicating that our underlying business is performing well,” said Doug McMillion, president/ceo of Walmart International. “We are working hard to improve execution where it’s needed, and we’re ready with great merchandise and price investments for the fourth quarter.”

Speaking of fourth quarter, Walmart raised its adjusted earnings forecast for the quarter to $1.53 to $1.58 a share, up from $1.44. But that guidance is still below analysts’ consensus expecting $1.59 a share. As for full year 2012, Walmart lifted the low end of its outlook to $4.88 to $4.93 a share, but still below the $4.94 analysts forecast.

“Current macroeconomic conditions continue to pressure our customers,” said Charles Holley, Walmart’s chief financial officer. “The holiday season is predicted to be very competitive, but we are well prepared to deliver on the value and low prices our customers expect.”

The company expects its U.S. comp store sales to increase 1% to 3% at Walmart during the fourth quarter and 1.5% to 3.5% increase at Sam’s Club.

The company said U.S. same-store sales are projected to increase 1% to 3% at Wal-Mart and 1.5% to 3.5% at Sam’s Club.

“Our disciplined approach to operating the business and to the productivity loop drove profitability and expense leverage,” said Mike Duke, president/ceo of Walmart Stores. “Our fundamentals are strong, and we are well-positioned for the fourth quarter, including innovative plans to drive traffic, especially in our U.S. stores.”

“Price will continue to be a major factor for U.S. customers over the holidays,” Duke added. “Our strong price position and broad assortment are clear competitive advantages. Across all of our markets, we are seeing the same price consciousness as we do in the United States. More customers are part of a growing global middle class, looking for quality, value and a better life, and our EDLP model matters to these customers.”

Duke also noted that the company continues to invest in its e-commerce capacity.

“We made significant progress this quarter in enhancing our site for U.S. customers, and we are expanding e-commerce opportunities for shoppers in our key markets, including China, the U.K. and Brazil,” said Duke. “We also increased our position in China e-commerce retailer Yihaodian to 51%.”