Wal-Mart income dips in the third quarter (Updated)

Despite comp-store sales increases at Walmart and Sam’s Club, Wal-Mart Stores Inc. recorded $3.344 billion in net income for the fiscal third quarter of 2012, down 2.7% compared to the 2010 period.

The global retailer’s per share earnings were 97 cents, just below the 98 cents that was the consensus of analyst estimates. Total revenue for the quarter was $110.226 billion, up 8.1% compared to the 2010 period.

Comp store sales in Walmart U.S. were up 1.3% during the third quarter, which ended a streak of nine consecutive quarters of comp-store sales declines.

Net income during the first nine months of the company’s fiscal year reached $10.572 billion, up 2.3% compared to the 2010 period. Total revenue for the first nine months was $323.781 billion, up 6% compared to the 2010 period.

Company officials were upbeat about the quarterly performance.

“Every business segment is stronger today than it was a year ago, and we delivered solid earnings growth for our shareholders in the third quarter,” Mike Duke, Wal-Mart Stores president and CEO, said in a statement released early Tuesday morning. “Both Walmart U.S. and Sam’s Club exceeded comp sales guidance, and I’m pleased that the sales momentum positions us exceedingly well for the holidays. We also are pleased with the growth in both sales and operating income for Walmart International.”

DIVISION REPORTS
Operating income continues to be stronger in the company’s Sam’s Club and International divisions.

Segment operating income (third quarter and first nine months of FY 2011)
Walmart U.S.
Q3 2011: $4.467 billion
Q3 2010: $4.402 billion

Walmart U.S.
Q1-Q3 2011: $14.262 billion
Q1-Q3 2010: $13.898 billion

International
Q3 2011: $1.397 billion
Q3 2010: $1.223 billion

International
Q1-Q3 2011: $3.908 billion
Q1-Q3 2010: $3.605 billion

Sam’s Club
Q3 2011: $390 million
Q3 2010: $367 million

Sam’s Club
Q1-Q3 2011: $1.341 billion
Q1-Q3 2010: $1.224 billion

COST ISSUES
Although company officials touted the gain in comp-store sales and efforts to reduce expenses, cost of sales and admin expenses grew at a higher percentage than income and revenue growth during the third quarter.

Cost of sales totaled $82.591 billion during the third quarter, up 8.9% compared to the 2010 quarter. Costs for operating, selling, general and admin (SGA) expenses totaled $21.757 billion, up 6% compared to the 2010 period.

The company also carried $44.135 billion in inventory as of Oct. 31, up 7.49% compared to Oct. 31, 2010.

“The company leveraged operating expenses this quarter, with all three operating segments achieving that goal as well,” Duke said in the earnings statement. “We are committed to leveraging expenses again this year. Our overall performance reflects Walmart’s strategy of driving the productivity loop, reducing expenses and investing in price.”

EARNINGS GUIDANCE
Company officials expect fourth quarter earnings to range between $1.42 and $1.48 per share, up compared to the $1.41 during the 2010 fourth quarter. The consensus of analyst estimates is that Wal-Mart will post fourth-quarter per share earnings of $1.45.

The company is also upbeat about full-year earnings, according to Charles Holley, Wal-Mart executive vice president and chief financial officer.

“Based on our year-to-date results and fourth quarter guidance, this implies a full year EPS from continuing operations range of $4.45 to $4.51. This compares to last year’s full year EPS of $4.18, which included an approximate $0.11 per share benefit from certain tax items,” Holley said in the statement. “Our guidance estimates assume that currency exchange rates remain at current levels and reflect our confidence in the business for the fourth quarter.”

The consensus of analyst estimates is that Wal-Mart will post full-year per share earnings of $4.49.

Wal-Mart shares (NYSE: WMT) closed Monday at $58.89, and pre-market bids suggest the shares would open Tuesday at $58.04. During the past 52 weeks the share price has ranged from a $59.40 high to a $48.31 low.