Quarterly income down more than 23% at Wal-Mart Stores, but revenue and income beat estimates

Second quarter net income fell more than 23% and dipped more than 13% for the first half of the fiscal year, but Wal-Mart Stores’ top and bottom line numbers in the quarter beat market expectations thanks in large part to same-store sales gains at Walmart U.S. and Sam’s Club.

The Bentonville-based global retailer announced early Thursday (Aug. 17) that fiscal second quarter net income reached $2.899 billion, off 23.16% compared with the $3.773 billion in the same quarter of 2016. The per share earnings were 96 cents.

However, the company in the quarter took a 17 cent per share hit on an early debt restructure, and gained 5 cents per share on the sale of its Suburbia stores in Mexico. The net 12 cents per share pushed adjusted earnings per share to $1.08, beating the consensus estimate of $1.07.

Revenue also beat expectations. Second quarter total revenue was $123.355 billion, better than the $120.854 billion in the same quarter of 2016 and above the $122.84 billion consensus estimate among analysts who cover the retailer.

Net income in the first half of the fiscal year was $5.938 billion, down 13.3% compared with the $6.852 billion in the same period of 2016. Total revenue in first half stood at $240.897 billion, better than the $236.758 billion in the same period of 2016.

“Thanks to the team for delivering another solid quarter. Our customers are responding to the improvements in stores and online, and our results reflect this. Traffic increases at store level and the e-commerce growth rate are key highlights. We are moving faster and becoming more creative as we strive to make every day easier for busy families,” Wal-Mart Stores CEO Doug McMillon said in the earnings statement.

SAME-STORE SALES, E-COMMERCE GROWTH
Walmart U.S., the retailer’s largest division, posted sales of $78.738 million in the quarter, up 3.3% compared with the same period in 2016. Comp sales were up 1.8% compared to a 1.6% growth in the same period of 2016. The quarter marked the 12th consecutive quarter, or three years, that comp sales rose at Walmart U.S.

Operating income for the segment rose from $4.519 billion in the second quarter of 2016 to $4.618 billion in the recent second quarter.

Walmart International posted fiscal second quarter sales of $28.331 billion, just below the $28.621 billion in the same period of 2016. However, when adjusted for currency differences, the revenue was $29.326 billion, up 2.5%. Operating income in the division was $1.592 billion, down 7.8% compared with the same quarter of 2016. The operating income decline improves to a 2% dip when adjusted for currency differences.

Sam’s Club saw sales of $14.88 billion in the second quarter, up 2.3% compared with the $14.543 billion in the same quarter of 2016. Comp sales were 1.2% in the quarter, doubling the 0.6% growth in the 2016 quarter. Operating income in the division was $404 million, down 14.4% compared with the same quarter of 2016.

Operating income for the three divisions totaled $5.969 billion, down 3.2% compared with the $6.165 billion in the same quarter of 2016.

On the growing e-commerce front, the retailer said gross merchandise volume through Walmart U.S. grew 67% “as customers continued to respond well to new initiatives and an expanded assortment of more than 67 million SKUs,” the company noted in the earnings report. Net e-commerce sales rose 60% in the second quarter.

Despite beating the top and bottom line estimates, investors were bearish on the shares in pre-market activity. As of 7:15 a.m., Wal-Mart shares (NYSE: WMT) were off the Wednesday closing price by almost 3%. The share price closed Wednesday at $80.98, up 21 cents. In the past 52 weeks the share price ranged between $81.99 and $65.28.