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Walmart Falls After Cut in Fiscal View, Q2 Earnings In Line - Analyst Blog

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Shares of Wal-Mart Stores Inc. ( WMT ) went down 1% after it lowered its fiscal guidance during the second quarter fiscal 2015 earnings call. However, the company posted in-line earnings and better-than-expected revenues, after five weak quarters in a row.

Walmart's fiscal second quarter 2015 adjusted earnings of $1.21 per share matched the Zacks Consensus Estimate, but declined 1.6% from the year-ago earnings of $1.23 per share due to soft comps in the U.S. and Sam's Club and a decline in operating income. Earnings were within management's guidance range of $1.15 and $1.25 per share.

Wal-Mart Stores, Inc - Earnings Surprise | FindTheBest

Total revenue of the retailer increased 2.8% to $120.1 billion (including membership and other income) and beat the Zacks Consensus Estimate of $119.1 billion. The better-than-expected sales were encouraging as the company delivered weak results in the past five quarters due to a tough economic environment. Sales increased on improvements in the International business, higher Neighborhood Market sales in the U.S. and strong e-commerce growth.

Global e-commerce sales increased approximately 24% on a constant currency basis, with double-digit growth in the U.S., U.K., China and Brazil. However,currency fluctuations reduced sales by $696 million in the quarter.

Total revenue comprised net sales of $119.3 billion (up 2.8% year over year or 3.4% on a constant currency basis) and membership and other income of $789 million (up 8.2% on a year over year).On a constant currency basis, operating income declined 0.3% to $6.8 billion in the second quarter.

Segment Details

Walmart U.S: The segment posted net sales growth of 2.7% to $70.6 billion in the quarter, including the impact of fuel sales. Operating income however declined 2.4% to $5.25 billion due to higher operating expenses.

U.S. same-store sales (comps) for the 13-week period ending Aug 1, 2014 remained flat versus a decline of 0.3% in the prior-year quarter. Comp sales were in line with the company's expectations. While comp traffic declined 1.1%, average ticket increased 1.1% in the quarter. E-commerce sales positively impacted comp sales by 0.3% in the quarter.

Comp sales for the Neighborhood Market format rose approximately 5.6%, which benefited U.S. comps. During the second quarter, the company opened 22 neighborhood markets. The company expects to deliver 180 to 200 new units for the year.

Walmart International: Segment net sales, including fuel sales, increased 3.1% (increased 5.3% on a constant currency basis) to $33.9 billion compared to the prior year quarter. Currency fluctuations impacted international sales by $696 million in the quarter.

Operating income increased 8% to $1.489 billion, largely benefiting from price investment and cost containment efforts.

Sam's Club: The segment, which comprises membership warehouse clubs, posted net sales growth, including fuel impact, of 2.3% to $14.9 billion. Excluding fuel impact, sales increased 1.7%. Sam's Club operating income, excluding fuel, declined 10.2% to $0.466 billion in the quarter.

Sam's Club's comps, excluding the impact of fuel sales, remained flat versus an increase of 1.7% in the prior-year quarter. Comp sales were in line with the company's expectations. Sam's Club comp traffic was up 0.3%, while average ticket was down 0.3%. E-commerce sales positively impacted comp sales by approximately 0.3% in the quarter.

Other Financial Update

During the quarter, Walmart paid $1.55 billion in dividends and repurchased approximately 4 million shares for $307 million.

Third Quarter 2015 Outlook

For the third quarter of fiscal 2015, Walmart expects its adjusted earnings to range between $1.10 and $1.20 per share, lower than last year's earnings of $1.24 per share. Walmart expects U.S. comp sales to be relatively flat for the 13-week period ending Oct 31, as against a decline of 0.3% last year. Sam's Club comp sales, without the impact of fuel sales, are expected to be slightly positive compared to a 1.1% increase last year. The company expects third quarter tax rate to be around 34%.

Lowered Fiscal 2015 Outlook

Walmart lowered its fiscal 2015 earnings guidance to a range of $4.90 to $5.15 per share, from the previous range of $5.10 to $5.45. The new full year guidance reflects incremental investments in e-commerce and higher U.S. health-care costs than previously anticipated.

Walmart carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Some better-ranked retailers worth considering include Citi Trends Inc. ( CTRN ), Mens Wearhouse Inc. ( MW ) and Buckle Inc. ( BKE ). While Citi Trends and Mens Wearhouse sport a Zacks Rank #1 (Strong Buy), Buckle Inc. holds a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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