Wal-Mart Income, Comp Sales Down In First Quarter

Officials with Wal-Mart Stores Inc. said bad weather and a currency exchange rate were partially to blame for a comparable decline in net income in the first fiscal quarter and total revenue that was just 0.8% higher than the same quarter in 2013.

The Bentonville-based retailer reported per share net income for the first fiscal quarter of $1.11, below the consensus estimate of $1.15.  Net income attributable to Wal-Mart fell to $3.59 billion from $3.78 billion in the previous year.

Total revenue of $114.96 billion was up slightly over the $114.07 billion in first quarter of 2013 and was below the consensus estimate of $116.27 billion.

“Walmart’s first quarter net sales increased 0.8 percent over last year. Like other retailers in the United States, the unseasonably cold and disruptive weather negatively impacted U.S. sales and drove operating expenses higher than expected,” Wal-Mart President and CEO Doug McMillon said in the earnings report released early Thursday (May 15).

The company said revenue took a $1.6 billion hit because of a currency exchange rate fluctuation. The company also paid $1.5 billion in the quarter to acquire “substantially all” of the outstanding shares in Walmart Chile.

During the first quarter, Walmart U.S. comp traffic fell 1.4 and the average shopper ticket rose 1.3%. E-commerce sales boosted comp sales by approximately 0.3% during the quarter. Comp sales for Sam’s Club – excluding fuel – were down 0.2% and the average ticket was down 0.3%. E-commerce boosted Sam’s comp sales by 0.2%.

Overall, net sales totaled $67.852 billion at Walmart U.S., up 2%. Net sales were $32.424 billion with Walmart International, down 1.4%. Net sales were $13.891 billion at Sam’s Club (including fuel), up just 0.1%.

A bright note was the company’s overall e-commerce activity, with global sales in that category up 27% in the quarter.

“We have the opportunity to create transformative growth through stronger e-commerce capabilities,” McMillon said in the statement. “Our investments are focused on improving customer experience and fulfillment capacity. We’re working to deliver a relevant, personalized and seamless customer experience across all channels to further grow sales.”

Another bright note were sales in the retailer’s smaller format U.S. stores – an area in which Wal-Mart is providing more focus and investment.

“Neighborhood Markets continued to deliver strong results. Comp sales increased approximately 5 percent for the quarter, and net sales have nearly doubled versus two years ago,” Bill Simon, president and CEO of Walmart U.S., said in the report. “We saw strength across food and health & wellness, and we’re particularly pleased with our overall traffic trend. April marked the 46th consecutive month of positive comps for Neighborhood Market.”

The company expects second fiscal quarter financials to be similar to those in the same quarter of 2013.

“We expect second quarter fiscal year 2015 diluted earnings per share from continuing operations to be between $1.15 and $1.25. This compares to $1.24 last year,” Charles Holley, executive vice president and chief financial officer, said in the report. “Our guidance assumes incremental investments in e-commerce, headwinds from higher health care costs in the U.S. and increased investments in Sam’s Club membership programs. We continue to expect our full-year effective tax rate to range between 32 and 34 percent. We expect our effective tax rate to be at the high end of this guidance for the second quarter.”

Wal-Mart shares (NYSE: WMT) were set to open Thursday at $79.03. However, in pre-market trading the share price was down more than 3%. During the past 52 weeks the share price has ranged from an $81.37 high to a $71.51 low.