OREANDA-NEWS. November 15, 2012. Q3 Highlights:
Wal-Mart Stores, Inc. (Walmart) reported third quarter diluted earnings per share from continuing operations of USD 1.08, within guidance of USD 1.04 to USD 1.09. This was an 11.3 percent increase from the USD 0.97 per share reported for the third quarter last year. 
The company updated its full year earnings guidance, narrowing the range by five cents to USD 4.88 to USD 4.93. The top of the range remains unchanged from the guidance provided last quarter, when the company tightened the range and increased it by a penny.
Net sales were USD 113.2 billion, a 3.4 percent increase over last year. Currency exchange rate fluctuations negatively impacted net sales by approximately USD 1.7 billion. Without the currency impact1, net sales would have been USD 114.9 billion, a 4.9 percent increase.
Walmart U.S. comparable (“comp”) store sales increased 1.5 percent in the 13-week period ended Oct. 26, 2012.
Sam's Club comp sales, without fuel, increased 2.7 percent for the same 13-week period.
Walmart International grew net sales 2.4 percent to USD 33.2 billion; on a constant currency1 basis, net sales would have increased 7.6 percent to USD 34.8 billion.
The company leveraged operating expenses for the quarter.
Consolidated operating income was USD 6.1 billion, up 4.0 percent from last year, and grew faster than sales.
Walmart generated free cash flow1 of USD 7.0 billion for the nine months ended Oct. 31, 2012.
Return on investment1 (ROI) for the trailing 12 months ended Oct. 31, 2012 was 18.0 percent.
Year to date, the company returned USD 8.7 billion to shareholders through dividends and share repurchases.


Wal-Mart Stores, Inc. (NYSE: WMT) today reported financial results for the quarter ended Oct. 31, 2012. Net sales for the third quarter of fiscal 2013 were USD 113.2 billion, an increase of 3.4 percent from USD 109.5 billion in the third quarter last year. Net sales for this quarter included a negative currency exchange rate impact of approximately USD 1.7 billion. Without the currency impact, net sales would have been USD 114.9 billion. Membership and other income increased 2.1 percent to USD 725 million. Total revenue was USD 113.9 billion, an increase of 3.4 percent from last year.

Income from continuing operations attributable to Walmart for the quarter was USD 3.6 billion, up 8.7 percent from the third quarter last year. Diluted earnings per share from continuing operations attributable to Walmart (EPS) for the third quarter of fiscal 2013 were USD 1.08. By comparison, last year's reported EPS were USD 0.97.

The current quarter benefited from a 31.3 percent effective tax rate. This benefit was mostly offset by approximately USD 105 million in pre-tax charges which are included in operating expenses:
an approximate USD 69 million for changes in estimated contingent liabilities related to employment claims in Brazil; and
an approximate USD 36 million for damages from Superstorm Sandy, mainly in the Walmart U.S. business.

Solid earnings performance

“We're very pleased with our financial performance for the third quarter and the dedication and hard work of our associates serving Walmart customers and communities around the world,” said Mike Duke, Wal-Mart Stores, Inc. president and chief executive officer. “Earnings per share were USD 1.08, which represents an 11.3 percent increase over the third quarter last year.”

The company leveraged operating expenses for the third quarter, delivering on its commitment to reduce costs, improve productivity and invest in price.

“Our disciplined approach to operating the business and to the productivity loop drove profitability and expense leverage,” said Duke. “Our fundamentals are strong, and we are well-positioned for the fourth quarter, including innovative plans to drive traffic, especially in our U.S. stores.

“Price will continue to be a major factor for U.S. customers over the holidays. Our strong price position and broad assortment are clear competitive advantages,” he explained. “Across all of our markets, we are seeing the same price consciousness as we do in the United States. More customers are part of a growing global middle class, looking for quality, value and a better life, and our EDLP model matters to these customers.”

Duke also noted that the company continues to invest in e-commerce to build the anywhere, anytime relationship that customers want.

“We made significant progress this quarter in enhancing our walmart.com site for U.S. customers, and we are expanding e-commerce opportunities for shoppers in our key markets, including China, the U.K. and Brazil,” said Duke. “We also increased our position in China e-commerce retailer Yihaodian to 51 percent.”

Returns

Walmart delivered free cash flow of USD 7.0 billion for the nine months ended Oct. 31, 2012, compared to USD 3.4 billion the previous year. Return on investment (ROI) for the trailing 12 months ended Oct. 31, 2012 was 18.0 percent, compared to 18.2 percent for the same prior year period. The company's capital discipline benefitted ROI. However, this benefit was mostly offset by currency exchange rate fluctuations.

“Despite current economic conditions, we continue to produce solid operating results with strong cash flow from operations,” said Charles Holley, executive vice president and chief financial officer. “The strength of our free cash flow allows us to provide good returns to our shareholders through dividends and share repurchases.”

Company updates full-year EPS guidance

“Current macroeconomic conditions continue to pressure our customers,” said Holley. “The holiday season is predicted to be very competitive, but we are well prepared to deliver on the value and low prices our customers expect.

“We consider the competitive retail environment and economic factors, among others, when we provide guidance. Based on these considerations, we expect fourth quarter fiscal 2013 diluted earnings per share from continuing operations to range between USD 1.53 and USD 1.58. This compares to last year's fourth quarter reported EPS of USD 1.51, which benefitted USD 0.07 from certain items,” said Holley. “Net of those items, earnings per share for last year's fourth quarter would have been USD 1.44.

“For the full year, we are tightening and reaffirming the top end of our earnings per share guidance to a range of USD 4.88 to USD 4.93. This compares to our previous guidance of USD 4.83 to USD 4.93,” Holley said. “Last year's full-year EPS was USD 4.54.”

The following explanations provide additional context to the above table for the third quarter.
Constant currency consolidated net sales would have increased by 4.9 percent to USD 114.9 billion during the third quarter.
Walmart International net sales, on a constant currency basis, would have increased 7.6 percent to USD 34.8 billion.
Sam's Club net sales, excluding fuel, were USD 12.2 billion, an increase of 3.6 percent from last year's third quarter results.


The following explanations provide additional context to the above table for the third quarter.
Consolidated operating income, which includes other unallocated, was USD 6.1 billion, up 4.0 percent from last year. On a constant currency basis, consolidated operating income would have increased 4.5 percent.
All three segments grew operating income faster than sales, a company priority.
On a constant currency basis, Walmart International's operating income would have increased 6.8 percent. Currency exchange rate fluctuations negatively impacted operating income by approximately USD 29 million.
Sam's Club operating income, excluding fuel, increased 14.2 percent.

“We were pleased that our constant currency sales and operating income were both up approximately 7 percent for the third quarter,” said Doug McMillon, president and CEO of Walmart International. “We gained market share in almost all of our markets, indicating that our underlying business is performing well. We are working hard to improve execution where it's needed, and we're ready with great merchandise and price investments for the fourth quarter.”

    
During the 13-week period, the Walmart U.S. comp was driven by an increase in average ticket of 1.4 percent. Traffic was positive by 0.1 percent. All three geographic regions had positive comp sales.

“We again delivered strong sales across the business, adding USD 2.3 billion in revenue. Comp sales increased 1.5 percent this quarter, as we lapped a 1.3 percent comp last year,” said Bill Simon, Walmart U.S. president and chief executive officer. “We're excited about the fourth quarter. November sales started ahead of plan. Our Black Friday plans are innovative and designed to drive additional traffic in our stores. We expect strong performance through Thanksgiving weekend.”

For the 4-5-4 period from Oct. 27, 2012 through Jan. 25, 2013, Walmart U.S. expects comp store sales to range from 1.0 percent to 3.0 percent. The Walmart U.S. 13-week comp for last year's fourth quarter rose 1.5 percent.

For Sam's Club, comp traffic and ticket, excluding fuel, increased for both Business and Advantage members for the 13-week period ended Oct. 26.

“Sam's Club comp sales, while a solid 2.7 percent, fell short of our guidance. Business members in particular, continued to be pressured economically,” said Rosalind Brewer, Sam's Club president and chief executive officer. “Inflation was lower than last quarter and much less than a year ago. While lower costs are good for our members, deflation impacted comp sales more than expected. Sam's Club is stepping up price investment for the holidays, and we are well prepared for our members' gifting and entertaining needs.”

Sam's Club expects comp sales, without fuel, for the current 13-week period ending Jan. 25, 2013, to increase between 1.5 percent and 3.5 percent. Last year, Sam's Club comp, without fuel, for the fourth quarter comparable 13-week period rose 5.4 percent.

To align with the company's internal operating systems, Walmart will report comp sales for the fourth quarter of fiscal year 2013 on a 4-5-4 basis and will not recognize a 53-week retail calendar this year. For fiscal year 2014, Walmart will report comp store sales on a 53-week basis, with 4-5-5 reporting for the fourth quarter.

Both Walmart U.S. and Sam's Club will report comp sales for the 13-week period on Feb. 21, 2013, when the company reports fourth quarter results.