Wal-Mart income up, company boosts guidance

Quarterly income at Wal-Mart Stores Inc. beat analyst expectations by 1 cent per share and the company’s key metric of same-store sales improved — good signs for the health of the overall U.S. economy.

However, the Walmart U.S. division’s same-store sales slumped 1% for the first two fiscal quarters of the year. Although it was an improvement over the 1.6% dip in the comparable 2010 period, it marked the ninth consecutive quarter of same-store sales declines.

Net income in the second quarter — ending July 31 — totaled $3.801 billion, up 5.7% compared to the 2010 period. Per share earnings of $1.09 beat the $1.08 per share that was the consensus of analyst estimates. Total revenue for the quarter was $109.366 billion, up 5.4% compared to the 2010 period.

“I’m encouraged by the sales improvement in our Walmart U.S. stores. Comp sales have increased sequentially month to month within the quarter. In fact, this was the best quarterly performance since the third quarter of fiscal 2010,” Mike Duke, Wal-Mart Stores, Inc. president and CEO, said in the earnings report released early Tuesday morning (Aug. 16). “Our EPS is near the top of our guidance.”

For the first half of the company’s fiscal year, net income was $7.228 million, up 4.4% compared to the 2010 period. Total revenue was $213.537 billion, up 4.9%.

DIVISION REPORTS
The stars for Wal-Mart continue to be the international division and Sam’s Club. Quarterly sales at Sam’s Club reached $13.646 billion, up 9.5%. Operating income for Sam’s Club in the quarter rose 15% to reach $492 million.

International operations generated $30.099 billion in the second quarter, up 16.2%. Revenue was up 7.1% when excluding the benefits of currency exchange. Quarterly operating income in the international division was $1.415 billion, up 8.9% compared to the 2010 quarter.

“Walmart International reported second quarter net sales growth of more than 16 percent over last year to $30 billion,” Duke said. “I’m pleased that we’ve made so much progress on integrating the acquisitions of the Netto stores in the U.K. and Massmart in sub-Saharan Africa. We look forward to the many opportunities we have in Africa to create jobs and help customers save money and live better.”

The global retail giant’s largest division, Walmart U.S., posted quarterly revenue of $64.893 billion, up 0.4%. Operating income in the segment was $4.985 billion, up 2.1%.

Bill Simon, Walmart U.S. president and CEO, said the division’s grocery and health and wellness business — two-thirds of division sales — showed positive comparable sales. He said the numbers are improving, but the company remains concerned with economic impacts on consumer confidence.

“We remain concerned about the economic pressure on our customers and the uncertain impact it can have on their shopping behavior,” Simon said in the earnings report. “With this volatility, it is as important as ever to deliver on Walmart’s one-stop shopping promise for broad assortment and every day low prices.”

GUIDANCE
Potential good news for the overall U.S. economy is that Wal-Mart boosted its earnings guidance for the third fiscal quarter and the full year.

The company expects earnings per share for the third quarter in the 95 cents to $1 range. Third quarter per share earnings in 2010 hit 95 cents. The consensus of analyst estimates prior to Tuesday’s report from Wal-Mart was that the company will earn 97 cents per share in the upcoming quarter.

For the full fiscal year, Wal-Mart projects per share earnings in the range of $4.41 to $4.51. The consensus of analyst estimates prior to Tuesday’s report was that the company will earn $4.46 per share in the fiscal year.

“Our guidance estimates assume that currency exchange rates remain at current levels. This reflects our confidence in the business for the back half of the year,” said Charles Holley, executive vice president and chief financial officer for Wal-Mart.

Wal-Mart shares (NYSE: WMT) closed Monday at $49.98, and pre-market bids suggest the shares would open Tuesday at $51.30. During the past 52 weeks the share price has ranged from a $57.90 high to a $48.31 low.