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Walmart Beats Earnings Prediction Despite Flat Q2 Comp Sales

For the second quarter ended July 31, Wal-Mart Stores, Inc. posted consolidated net income of $4.1 billion, an increase of 0.6% and diluted earnings per share from continuing operations of $1.21, down 1.6%. Without the impact of fuel price fluctuations, comparable store sales at Walmart locations in the United States and Sam’s Club units were flat, the retailer reported.

Walmart beat a $1.15 earnings per share Zacks Consensus Estimate of financial anlysts.

Walmart U.S. comp traffic decreased 1.1% in the second quarter while average ticket increased 1.1%. E-commerce sales boosted comps by approximately 0.3% for the 13-week period, according to the retailer. At Sam’s Club, comp traffic gained 0.3% but average ticket slipped 0.3%. E-commerce sales for the warehouse club chain lifted comps by approximately 0.3% for the 13-week period, according to Walmart.

Operating income declined by 2.4% at Walmart U.S. and by 10.2% at Sam’s Club in the quarter, the retailer noted.

Consolidated net sales increased 2.8% to $119.3 billion in the quarter versus the year-prior period. The company recognized the negative impact of $696 million from currency exchange rate fluctuations in the quarter. So, on a constant currency basis, net sales would have gained 3.4% to $120 billion, Walmart maintained. Membership and other income increased 8.2% versus last year’s second quarter. Total second quarter revenue was $120.1 billion, up 2.8% year over year, Walmart stated.

“I’m pleased with our solid earnings per share performance,” Doug McMillon, Wal-Mart Stores, Inc. president and CEO, said in announcing the financial results. “As it relates to the positives from the quarter, I’m encouraged by the performance of our International business, our Neighborhood Market sales in the U.S. and by our e-commerce growth. As it relates to our challenges in the quarter, we wanted to see stronger comps in Walmart U.S. and Sam’s Club, but both reported flat comp sales. Stronger sales in the U.S. businesses would’ve also helped our profit performance.”

McMillon took the occasion to point out  that Walmart is continuing to invest in enhancing its e-commerce capabilities and that the company needs to move quickly to serve customers more effectively.

“We see opportunities to improve in merchandising, pricing and store level service in our supercenters, and we are working to close those gaps,” he said. “Our investments in e-commerce and mobile are very important, as the lines between digital and physical retail continue to blur. Our customers expect a seamless experience, and we’re working to deliver that for them around the world.”