Despite Costs And Currency, Wal-Mart Posts Strong Q3

For the third quarter ended October 31, Wal-Mart Stores beat a Zacks Investment Research analyst average earnings estimate of 97 cents per share, posting company net income of $3.3 billion, or $1.03 a share, versus $3.71 billion, or $1.15 a share, in the year-ago quarter.

In the United States, comparable store sales, excluding the impact of fuel price volatility, gained 1.5% at Walmart stores and 0.4% in Sam’s Club for a composite comp of 1.4%.

With fuel impact included, comparable store sales at Walmart stores increased 1.5% but those at Sam’s Club slid 3.3% for a 0.7% composite.

Store traffic gained 1.7% in the quarter but average ticket slipped 0.2%.

Net sales were $116.6 billion versus $118.08 billion in the quarter a year earlier. Total revenue, including membership and other income, was $117.41 billion in the latest-completed quarter, compared with $119 billion in the period a year prior.

Walmart stated that, on a constant currency basis, total revenue was $122.4 billion, an increase of 2.8%.

In a conference call, as transcribed by Wal-Mart, Doug McMillon, the company’s CEO, characterized the third as “a good quarter.”

He added, “We delivered earnings per share well within our guidance range, recorded our fifth straight quarter of positive comps at Walmart U.S., and had solid international sales and profit growth on a constant currency basis.”

McMillon continued, “Our earnings per share were $1.03, and we posted total revenue of $117.4 billion. I want to highlight that, on a constant currency basis our total revenue would have been $122.4 billion. That’s growth of $3.4 billion or 2.8% on a constant currency basis, which is solid growth. Even if the percentage doesn’t sound high because we have such a large denominator, not many companies grow by this amount in a quarter. I call this out because I don’t want the currency impacts to obscure the strength of our business. We are a growth company, and we’re growing. “

Operating income was $5.71 billion versus $6.27 billion in last year’s quarter. Walmart asserted that investment in employee compensation and technology continued to depress operating income.

In the conference call, McMillon said that customer store experience and creating a bridge to an increasingly digital future are priorities for Walmart, and the company has committed to a $1.2 billion investment in employees this year, which wound up being the biggest driver of the consolidated operating income decline.

In the U.S., Walmart store sales were $72.71 billion versus $70.02 billion in last year’s quarter while operating income was $4.51 billion versus $4.93 billion in the period a year prior. At Sam’s Club, sales were $14.08 billion versus $14.39 billion in the year-earlier quarter while operating income was $539 million versus $493 million in the year-ago quarter.

E-commerce sales advanced about 10%, Walmart said.

Among the factors depressing Walmart sales was the strong dollar. According to the company, Walmart International net sales were $29.81 billion but $34.7 billion on a constant currency basis, led by Mexico and Canada. In a similar vein, international operating income decreased 6.4% in gross terms but gained 8.5% on constant currency basis. International sales in last year’s third quarter were $33.66 billion and operating income was $1.43 billion.