We maintained our Neutral rating on
Wal-Mart Stores, Inc.
) following appraisal of first quarter 2013 results.
Walmart posted robust first quarter 2013 earnings of $1.09 per
share, which outperformed the Zacks Consensus Estimate by 5 cents
per share and the prior-year earnings by 11 cents. The first
quarter 2013 results also exceeded the company's guidance of $1.01
to $1.06 per share. The earnings improved on the back of
better-than-expected top-line results.
Revenues climbed 8.6% to $112.3 billion, which also exceeded the
Zacks Consensus Revenue Estimate of $110.6 billion. We are
encouraged by the positive U.S. comparable sales of 2.6% in the
quarter, which were driven by improved traffic and product
offerings. The results also exceeded the company's guidance of flat
to 2.0% growth.
We are impressed with the company's size and scale of
operations. The company's significant exposure in the international
markets puts it among the top 3 largest retailers in the world.
Walmart also continues to expand internationally and in the
emerging markets through accretive acquisitions, new store growth
and positive comparable store sales.
Further, Walmart has also been focusing on expanding its online
business, where it holds the sixth position. It has already
developed its online businesses in U.S., U.K., Canada and Brazil.
To further expand its e-commerce business, Walmart has increased
its controlling stake to 51% in Chinese Internet retailer
Yihaodian. Besides, the world's largest retailer acquired the Vudu
streaming video service from its rival
) in February 2010 and California-based technology company Kosmix
in April 2011, demonstrating its commitment to e-commerce.
However, the retail giant has not been able to enter the
Indian markets and tap a large customer base of $1.2 billion,
even though it has a significant international presence. The
proposal to allow 51% foreign direct investment in India by
multi-brand retailers like Walmart would have provided a good
option to enter Indian markets. However, it raised debates in India
and thus the Indian government has suspended the proposal for the
Additionally, Walmart remains exposed to unfavorable foreign
currency translations due to its considerable international
presence. With rising investments in markets outside U.S., Walmart
also faces economic and political risks. In addition, the company
operates in a highly competitive retail market. Walmart also needs
to be more competitive, as U.S. shoppers seek for discounts on
items to cope with high unemployment. Moreover, we remain cautious
of the weak economy and the rising costs, which keep us on the
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