Walmart Surprises with Profit Beat, Comp Store Increase

In Reports, What's New, Industry News by Accessories Staff

walmart storeBentonville, AR—Walmart surprised many today with an earnings report that beat analysts’ forecasts as comp store sales rose for the fifth straight quarter.

]Third quarter earnings were $1.03 a share beating the consensus estimate of 97 cents by 6.2%. However, it declined 10.4% from the year-ago earnings from continuing operations of $1.15 per share. Earnings were however within management’s guided range of 93 cents to $1.05 a share.

Although overall sales were down more than 1%, Walmart did report its fifth consecutive quarter of comp store sales growth in the U.S. And store traffic rose 1.7%. Total revenue would have been higher if not for currency fluctuations. A sales decline at Sam’s Club and the international business resulted in the year-over-year decline in earnings. Currency also negatively impacted earnings by 4 cents.

Total revenue was $117.4 billion (including membership and other income)—that slightly missed estimates for $117.9 billion in sales. Currency depleted sales by approximately $5 billion.  On a constant currency basis, revenues increased 2.8% to $122.4 billion. E-commerce sales increased approximately 10% globally on a constant currency basis. However, e-commerce growth was weaker than the preceding quarter’s growth of 16% due to a challenging scenario in key international markets.

‘Work to Do’

Operating income declined 8.8% to $5.71 billion in the third quarter. On a constant currency basis, operating income declined 5.4%, as the company continued to invest in people and technology. Besides currency, higher investment in e-commerce initiatives in order to compete with online retailer Amazon.com and in associates through higher wages and training seem to have dampened operating income.

CEO Doug McMillon said in Walmart’s earnings release that it’s “taking the right steps to win with customers.” But he conceded that Walmart still has “work to do.”

“We’ll continue to win on value. We’ve won on value in the past and that won’t change,” he said.

Walmart has warned in October that sales would be weaker and that the wage hike it announced earlier this year would cut into profits.

The stock is down 33% this year, making it the worst performer in the Dow. Warren Buffett’s Berkshire Hathaway disclosed Monday that it cut its stake in Walmart during the third quarter — before the earnings warning.

McMillon and Walmart U.S. CEO Greg Foran both stressed several times during the earnings call that “convenience” was becoming more important for customers.

Walmart said that it expects fourth quarter earnings to be in a range of $1.40 to $1.55 a share. Analysts’ consensus estimate is for $1.43 a share.

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