Home Supports Walmart Q1 Gains

Wal-Mart reported positive developments for the company overall in its first quarter, with home goods providing a boost to Walmart’s stores in the United States but e-commerce lagging expectations.

For the first quarter ended April 30, Wal-Mart Stores posted company net income of $3.08 billion, or 98 cents per diluted share, versus $3.34 billion, or $1.03 per diluted share, in the period a year earlier, with currency exchange fluctuation and investment in employee costs hitting the company’s results.

Walmart beat a Thomson Reuter’s analyst average estimate on both the revenues and profits side, with earnings per diluted share coming in ahead of expectations by 10 cents.

Comparable sales at Walmart stores in the United States gained 1%, driven by a 1.5% increase in customer traffic but slowed by a 0.5% decline in average ticket value. E-commerce generated about 20 basis points of the comp gain. Neighborhood Market comps increased by about 7.1%.

At Sam’s Club, comps sales, excluding fuel price effects, gained 0.1% versus the year-earlier quarter, with traffic down 0.2%, ticket up 0.3% and e-commerce kicking in about 60 basis points of the advance.

Total Wal-Mart revenue was $115.9 billion for the quarter versus $114.83 in the period a year prior. On a constant currency basis, revenue was $119.43 billion versus $114.83 billion in the previous-year quarter. Net sales, excluding membership fees and other income, was $114.97 billion versus $114 billion in the quarter a year earlier. Operating income slipped 7.1% to $5.28 billion, squeezed by human resource and technology investments, as well as currency fluctuation effects. With the currency impact excluded, operating income decreased by 4.6% to $5.42 billion in the quarter versus the year-prior period.

Net sales at Walmart U.S. gained $4.3% to $73.3 billion in the quarter year over year. Net sales at Walmart international slid by 7.2% to $28.08 billion versus the year-earlier quarter but gained 4.3% on a constant currency basis to $31.58 billion. Sam’s Club net sales increased 1% to $13.61 billion.

Wal-Mart said that in its namesake U.S. stores, general merchandise comps overall advanced in the low single digits and that the home department, credited with solid sales gains, benefited from new brands including Pioneer Woman. At Sam’s Club, kitchen electrics and home improvement were particularly strong categories, with the home and apparel segment comping positive in the low single digits.

E-commerce sales advanced by 7% in the first quarter globally, but Doug McMillon, Wal-Mart’s CEO, characterized that growth as “too slow.”

In a quarterly conference call, McMillon said, “The U.S. number is better than the global number but neither is as high as we’d like. We can see progress against several of the necessary capabilities we need to win in e-commerce, but we’re still working on a few others. We need them all to come together to see stronger growth. For example, our marketplace is ramping up but it takes time to build the assortment to the point where customers realize the depth of assortment. We now offer more than 10 million SKUs on Walmart.com, and we are growing that number through a combination of first-party and third-party items. It makes sense that perception will trail reality, and we’ll work on both during the course of this year.”

In reference to a major e-commerce-based initiative, McMillon said, “Our grocery pickup service in the U.S. continues to receive high marks from customers, and we’re continuing to expand it. I’m pleased to share we’re announcing nine new markets today, bringing our total number of markets to nearly 40 by the end of this month. In addition, in some markets, we’ll double the number of stores that offer the service locally in May. We expect to continue to quickly expand to new markets.”

Wal-Mart operates 11,527 stores under 63 banners in 28 countries and e-commerce websites in 11 countries.