Quarterly income, sales up at Wal-Mart

Wal-Mart Stores reported solid numbers for the first quarter of its fiscal year 2013, with net income up more than 9%, and U.S. same store sales up 2.6%.

The per share earnings of $1.09 were ahead of the 98 cents in the same quarter of last year, and above Wall Street estimates.

The consensus earnings-per-share estimate of the 23 analysts who cover Wal-Mart was $1.04. The estimate range was narrow, with $1.02 as the low, and $1.08 as a high.

Total revenue for the quarter ended April 30 was $113.018 billion, up 8.5% compared to the same quarter in 2011 — and that was up against a negative foreign currency exchange rate that reduced the top line by about $800 million.

“We are very pleased that Walmart delivered earnings and comparable sales above guidance for the first quarter. Despite a negative impact from currency, we grew sales and operating profit over last year,” Mike Duke, Wal-Mart Stores president and CEO said in the earnings statement issued Thursday morning (May 17). “Our overall performance reflects the success of Walmart’s business model: driving the productivity loop, leveraging expenses and investing in price leadership. We believe that the momentum throughout our business positions us very well for the rest of the year.”

Operating income in the Walmart U.S. division was $5.033 billion, up 8.1% compared to the same quarter a year ago. Total sales for the division were $66.341 billion, up 5.9%.

Operating income in the company’s international division totaled $1.319 billion, up a healthy 21.2%. Total revenue in the division was $32.077 billion, up 15%.

The Sam’s Club division reported operating income of $490 million, up 7.7%. Total revenue at Sam’s Club for the quarter was $13.854 billion, up 8.6%.

“Our strategy is clear. Our merchants are focused on increasing sales through the right assortment at the right time and for the lowest price,” Bill Simon, Walmart U.S. president and CEO, said in the statement. “We will continue to invest in price to lower costs for our customers by enhancing leverage initiatives and managing expenses.”

The Bentonville-based company has struggled to seek lower costs, especially in its grocery business. According to a recent Raymond James & Associates report, Walmart’s “Great Value” basket price remains near an all-time high of $147.79 in May.

“The price remains near the high water mark for the private label basket in the history (now 23 months) of our survey that we measured last month. Versus last year, both baskets are higher. The (Walmart internal comparison) branded basket is up 2.3% to $192.22, while the Great Value® basket is up 4.4% to $147.79,” noted the report.

Wal-Mart reported heavy traffic to start 2012 with positive same-store sales growth of 1.8% in the quarter ending Jan. 31. But Wal-Mart CEO Mike Duke warned investors in February the company expects margins to decline as it continues its low-price strategy.

MEXICO
The Wal-Mart earnings report made no mention of the Mexico bribery scandal that was more fully revealed during the first fiscal quarter — a silence expected by the Wal-Mart watchers at Raymond James.

“Aside from operating results, investors are almost certainly hoping for an update on Walmart's ongoing investigation into its compliance with the U.S. Foreign Corrupt Practices Act (FCPA) that was sparked by allegations of bribery in Mexico. We would be surprised if management offered materially new information on the issue given its complexity and ongoing nature.”

U.S. and Mexican prosecutors said last month they started probes of the bribery allegations. The retailer’s growth in Mexico has turned the company into the country’s largest private employer with more than 209,000 employees.

According to published reports, Wal-Mart’s Mexican unit paid the bribes to win government building permits for stores. Once the bribery allegations came to light, company officials failed to act on the results of an internal probe or inform authorities about the allegations, the California pension fund said in the suit.

“We are reviewing the lawsuit closely and thoroughly investigating the issues that have been raised,” said David Tovar, a Wal-Mart spokesman.

California and New York pension fund operators, in addition to individual shareholders, have pursued actions against Wal-Mart related to the Mexico-bribery issue.

NATIONAL RETAIL PICTURE
Retail sales rose in April at the slowest pace of the year as Americans took a break from a shopping spree induced by unseasonably warm weather in prior months and an earlier Easter holiday, according to Bloomberg News.

The 0.1% gain followed a 0.7% increase in March, the Commerce Department reported Tuesday (May 15). The April advance matched the median forecast in a Bloomberg News survey.

Sales of clothing declined, while purchases excluding cars, building materials and service stations — the category used to calculate gross domestic product — rose more than forecast.

On Wednesday (May 16), Target reported quarterly same-store sales growth of 5.3%, the largest increase in the past six years.

“Consumers overall are still pretty much engaged,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, the most-accurate forecaster of retail sales in the two years through April, according to data compiled by Bloomberg News.

Shares of Wal-Mart (NYSE: WMT) closed Wednesday (May 16) at $59.19, down 16 cents for the day. Wal-Mart released the earnings report Thursday morning prior to the market open. During the past 52 weeks, the share price has ranged from a $62.63 high to a $48.31 low.