Walmart Turns in 'Solid' Q3

Wal-Mart Stores Inc.’s net sales for the third quarter of fiscal year 2011 ended Oct. 31, 2010, were $101.2 billion, a rise of 2.6 percent from the $98.7 billion reported in the year-ago period. Income from continuing operations for the quarter was $3.4 billion, vs. $3.2 billion last year.

Diluted earnings per share (EPS) from continuing operations for the quarter were 95 cents, compared with an adjusted diluted EPS of 82 cents in the third quarter last year. The company’s EPS for the third quarter included a tax benefit of $191 million, or about five cents per share. Excluding the tax benefit, Walmart’s EPS was within its third-quarter guidance of 87 cents to 91 cents. The company raised its full-year EPS guidance to a range of $4.08 to $4.12, from its earlier range of $3.95 to $4.05.

“Walmart performed well in the third quarter, and we delivered solid earnings per share growth for our shareholders,” noted Mike Duek, the Bentonville, Ark.-based mega-retailer’s president and CEO. “Our company now has delivered four consecutive quarters of operating expense leverage, and we continue to grow operating income faster than sales.”

The company added almost 10 million square feet of retail space in the third quarter, with 37 percent of the square footage growth in Walmart International, whose net sales rose more than 9 percent in the third quarter over last year.

“Our International business continues to deliver impressive results, with sales up more than 9 percent,” continued Duke. “We also were pleased with the ongoing sales momentum at Sam’s Club and expect that momentum to continue in the fourth quarter. Our Walmart U.S. business is on the right track, with third quarter comp sales within guidance and operating income growing faster than sales.

Walmart U.S. net sales of $62.2 billion were relatively flat for the quarter compared with last year. Walmart International net sales were $26.9 billion, a rise of 9.3 percent from the year-ago period, with particularly strong sales performance in Mexico, Brazil, Japan and China. Net sales for Sam’s Club, excluding fuel, increased to $11.1 billion, a rise of 1.4 percent from last year.

Consolidated operating income was $5.6 billion for the quarter, up 3.1 percent from last year (2.9 percent on a constant-currency basis). Operating income was up 1.9 percent for Walmart U.S., which the company attributed to expense leverage and an increased gross margin rate. Walmart International posted operating income that included a currency exchange rate benefit of $11.0 million. On a constant-currency basis, Walmart International’s operating income grew 12.4 percent to $1.2 billion for the quarter. On a reported basis, the division’s operating income rose 13.5 percent to $1.2 billion, vs. the year-ago period. Sam’s Club operating income fell 7.1 percent from the prior-year-period, as a result of higher expenses and lower membership and other income following an accounting adjustment last year.

Walmart U.S. comparable-store sales dropped 1.3 percent in the third quarter 13-week period ended Oct. 29, 2010, while Sam’s Club’s comps, excluding fuel, grew 2.4 percent for the same period. Walmart U.S. expects comps to range between -1.0 percent and 2.0 percent for the fourth quarter 13-week period from Oct. 30, 2010, through Jan. 28, 2011. For last year’s comparable 13-week period, the division reported a 2.0 percent comp-store sales decline. For the 13-week period ending Jan. 28, 2011, Sam’s Club expects comps, without fuel, to rise between 1.0 percent and 3.0 percent. The division’s comps, without fuel, grew 0.7 percent last year during the fourth-quarter 13-week period. 
 

Walmart operates 8,692 retail units under 59 banners in 15 countries.