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Walmart Q4 Earnings Slip But Small Stores Leap Forward

Friday February 21st, 2014 - 12:18PM


As it posted a fourth quarter earnings shortfall, Wal-Mart, Inc. also announced that it would accelerate its small store growth plan. The retailer said  it would revise a capital forecast provided in October 2013 and now expects to add approximately 270 to 300 small stores during the fiscal year, doubling the initial forecast of 120 to 150.

Wal-Mart will continue to open approximately 115 new supercenters in the United States this year, the company pointed out.

“Customers’ needs and expectations are changing. They want to shop when they want and how they want, and we are transforming our business to meet their expectations,” said Bill Simon, Walmart U.S. president and CEO. “Customers appreciate the broad assortment of our supercenters for their stock-up trips as well as our small store formats for fill-in trips. By unlocking this growth opportunity and further combining our supercenters and small store formats with an unlimited selection available through E-commerce, we provide our customers with anytime, anywhere access to our brand.”

Under the small-store format heading, the company currently operates 346 Neighborhood Markets and 20 Walmart Express stores in the U.S. To fund the accelerated store growth, the company has revised a capital expenditures forecast for the Walmart U.S. segment to $6.4 to $6.9 billion, up from an initial range of $5.8 to $6.3 billion.

For the fiscal year ended January 31, Wal-Mart posted consolidated net sales of $473.1 billion, an increase of 1.6% over fiscal year 2013. Consolidated net income was $16 billion, a decrease of 5.7%, while diluted earnings per share from continuing operations attributable to Walmart were $4.85 versus $5.01 in the year earlier.

Currency exchange fluctuations trimmed $5.1 billion from net sales, which gained$700 million from the favorable impact of acquisitions. Membership and other income was $3.2 billion, up 5.6% from the prior year, so total revenue was $476.3 billion, up 1.6%.

Fourth quarter net sales were $128.8 billion, a 1.4% gain over last year’s period. Consolidated net income was $4.4 billion, down 21%. Diluted earnings per share from continuing operations were $1.34 versus $1.67 in the prior-year period, the company reported. The impact from the discrete items in the fourth quarter was 26 cents per share, the company maintained. In the quarter, the negative effect of currency exchange fluctuations cost Wal-Mart $1.8 billion from currency exchange rate fluctuations. On a constant currency basis, the company asserted, net sales would have increased 2.8% to $130.6 billion. Membership and other income for the fourth quarter advanced 12.7% over the year before, so total revenue was $129.7 billion, up 1.5% over the 2012 period.

Without considering the impact of fuel operations, fourth quarter comparable store sales for Walmart stores in the U.S. fell 0.4% while those at Sam’s Club fell 0.1%, for a combined negative 0.4%.

In a conference call, according to Wal-Mart, Doug McMillon, company president and CEO, said, “We were encouraged by our comp performance in the first half of the fourth quarter, including the holiday period. But, like many other retailers, weather got the best of us throughout the back half, resulting in a fourth quarter period comp decrease of 0.4.”

In comments on financial results, McMillon noted, "Our company grew net sales this year to reach more than $473 billion. Global E-commerce sales, including acquisitions, surpassed the $10 billion mark, a 30% increase over last year. Comp sales improvement is a key priority, and we’ll focus on being even stronger item and category merchants, delivering value and improving our service levels. We’ll remain focused on our expense structure and innovate to improve productivity and aid our ability to deliver every day low prices. Our EDLP approach earns trust with customers and helps us keep our cost structure low. We’ll invest aggressively in E-commerce and increase our small store rollout in the U.S., as we’ve done in several other countries, to deliver value and convenience. The combination of supercenters and smaller formats closer to customers’ homes, along with E-commerce and mobile commerce, will enable us to increase our relevance for the Walmart brand around the world."