Wal-Mart Stores, Inc
) poor run in the first half of fiscal 2014 continued well into
the third quarter as well. The retail giant beat the Zacks
Consensus Estimate for earnings in the third quarter of fiscal
2014 but missed the same for revenues due to a gloomy consumer
spending environment globally. Moreover, the company narrowed its
earnings expectations for the fiscal year.
Walmart's fiscal third quarter 2014 adjusted earnings
(excluding discontinuing operations related to Vips restaurants
in Mexico) of $1.14 per sharebeat the Zacks Consensus Estimate by
a penny. Earnings were up 5.6% year over year and were within the
company's guidance range of $1.11 and $1.16 per share.
Total revenue of the world's largest retailer climbed 1.7% to
$115.7 billion (including membership and other income) but missed
the Zacks Consensus Estimate of $116.5 billion. Currency
fluctuations reduced sales by $1.6 billion in the quarter. A
challenging retail environment in the U.S. as well as in most
international markets due to cautious consumer spending also hurt
the top line in the quarter.
Total revenue comprised net sales of 114.9 billion (up 1.6%
year over year or 2.7% on a constant currency basis) and
membership and other income of 0.8 billion (up 12.3% on a
On a constant currency basis, operating income increased 5.0%
to $6.4 billion, driven by productivity improvements.
The segment posted net sales growth of 2.4% to $67.7 billion in
the quarter, including the impact of fuel sales. Operating income
increased 5.8% to $5.1 billion.
U.S. same-store sales (comps) for the 13-week period ending
Oct 25 declined 0.3%; much lower than 1.5% growth in the
prior-year quarter. Weak consumer spending environment hurt comps
in the quarter. However, it was marginally better than the
company's guidance of flat comps. Comp traffic declined while
average ticket increased in the quarter.E-commerce sales also
positively impacted comp sales in the quarter.
Segment net sales, including fuel sales, increased 0.2% (4.1% on
a constant currency basis) to $33.1 billion. Segment sales were
softer than management expectations due to sluggish consumer
spending environment in both mature and emerging markets.
Currency fluctuations also negatively impacted the sales.
Operating income increased 1.7% to $1.46 billion owing to
improved operating expense leverage.
The segment, which comprises membership warehouse clubs, posted
net sales growth, including fuel impact, of 1.1% to $14.1
billion. Net sales, excluding fuel impact, increased 2.1% to
$12.4 billion. Sam's Club operating income grew 9.2% to $0.47
billion in the quarter.
Sam's Club's comps, excluding the impact of fuel sales, grew
1.1% in the quarter as positive traffic increase was offset by
decline in average ticket. Same-store sales growth was within the
guidance range of flat to 2.0%but lower than comps growth of 2.7%
in the prior-year quarter.
FY14 Outlook Lowered
The company expects a challenging sales environment and
currency headwinds to continue to hurt fiscal year results.
Walmart has revised its adjusted earnings expectations from a
range of $5.10 - $5.30 to $5.11- $5.21 per share. The adjusted
earnings figure will exclude the impact of closing approximately
50 under-performing stores in Brazil and China. It will also
exclude the impact of end of its franchise agreement with
India-based Bharti Retail for the retail business.
For the fourth quarter of fiscal 2014, Walmart expects its
adjusted earnings to range between $1.60 and $1.70 per share.
Walmart expects U.S. comp sales to be relatively flat for the
14-week period ending Jan 31, lower than last year quarter's
growth of 0.3%. Sam's Club comp sales growth, without the impact
of fuel sales, is expected to range between flat and 2% for this
14-week period, compared with last year quarter's growth of
Other Stocks to Consider
Walmart carries a Zacks Rank #3 (Hold). Other retailers worth
Best Buy Inc
Gamestop Corp Holding Co.
). While Best Buy carries a Zacks Rank #1 (Strong Buy), Conn's
and Gamestop hold a Zacks Rank #2 (Buy).
BEST BUY (BBY): Free Stock Analysis Report
CONNS INC (CONN): Free Stock Analysis Report
GAMESTOP CORP (GME): Free Stock Analysis
WAL-MART STORES (WMT): Free Stock Analysis
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