Wal-Mart share price sets new 52-week high following strong third quarter numbers

Investors are giving Wal-Mart Stores and its management team a standing ovation for beating expectations with third quarter earnings and revenue. Wal-Mart shares (NYSE: WMT) closed Thursday (Nov. 16) at $99.62, up $9.79, or almost 11%, for the day.

A $99.68 high during Thursday’s trading was a new 52-week high for the stock.

Analysts lauded Walmart U.S. CEO Greg Foran for growing sales revenue more than $2 billion on a comparable-store basis in the quarter, while also selling more units amid steady store traffic. Walmart U.S. comp sales growth of 2.7% was the best comp-sale store metric in six years, and more than double the 1.2% growth added a year ago. The company said recent hurricanes along the Gulf coast helped fuel comp sales adding between 0.3% to 0.5% to the total.

Foran told the media the secret to the solid results is a culmination of lots of little things, from expanding online grocery and executing that well, to improvements in private label assortments, lowering prices and giving employees better tools to do their jobs.

“I can’t say any one of these things is more important than the other. You have to have them all,” Foran told the media during a call Thursday morning.

Comp traffic in U.S. stores rose 1.5% which the retailer said benefited from e-commerce in-store pickup and grocery pickup to the tune of 0.8%. Net revenue topped $77.724 billion in the quarter ending Oct. 31, up 4.3% from a year ago. Operating income rose 0.8% to $4.03 billion in the quarter.

Wal-Mart said store comps and the comp ticket increase of 1.2% were positively impacted by the hurricanes as consumers were having to buy a few more big-ticket items. Foran said aside from the hurricane impact, consumers are generally buying more units per store visit.

“Fresh has been good, dry grocery and dairy sales were also strong in addition to women’s apparel and toys. Traffic is solid and we are getting people to put another item in their basket,” Foran told the media.

CNBC Mad Money host Jim Cramer said Foran is doing a great job improving the physical stores.

“I was in two Walmart stores recently and I took my wife who was the skeptic. The food assortment surprised her and we put a lot of stuff in our basket,” Cramer said during the Squawk Box segment Thursday morning. “It’s not too often a company comes out and says we are going to win against Amazon, but Wal-Mart has. Doug McMillon and Marc Lore are reinventing Wal-Mart – a company lowering prices and making money and it’s not Amazon, it’s Wal-Mart. Wal-Mart has figured it out.”

ECOMMERCE GAINS
Marc Lore, CEO of Wal-Mart U.S. eCommerce, said 133 category specialists were hired in the third quarter as the retailer looks to do a better job with inventory assortment online. He said work is ongoing to “nail the fundamentals” and said the category specialists will play a large role in that agenda.

He said the Lord & Taylor partnership creates a store within a store of the higher-end apparel which will be sold on Walmart.com this spring. He said the retailer will continue to look for more similar opportunities. When asked about the recent online pricing change of certain food items relative to store price, Lore said the move to raise the online price and also show the in-store price is a move toward transparency for the consumer.

Talk Business & Politics asked Lore about price transparency and the probability of smart basket technology offered on Walmart.com to give customers more insight into what it costs to ship goods.

“We said in October the smart basket is coming to Walmart.com and we are building that capacity now. We expect it to be available sometime next year,” Lore said.

He was also asked to give an update on any lessons learned around the employees delivering online orders to consumer homes. Lore told Talk Business & Politics the company has been careful about how that delivery option will be rolled out. He said tweaks were being made to the app used by employees who want to take part in the pilot. He said the majority of packages are being delivered within one day of order.

Walmart U.S. eCommerce posted net sales up 50% from a year ago, lapping the year-ago acquisition of Jet.com as of Sept. 19. The retailer expects e-commerce sales growth of 40% next year and Lore said the retailer continues to look for more suppliers like Bose who want to sell products online.

Karen Short, an analyst with Barclays, said a few years ago Bose would have never looked to sell on Walmart.com but that is changing. Short is bullish on Wal-Mart saying “the world changed on June 16 when Amazon bought Whole Foods. You were either on the right side or wrong side of this deal and Walmart was clearly on the right side.”

She said Walmart Pay has become a dominant form of payment that gives Wal-Mart much data about the consumer, which they can use as they expand assortment with more higher margin goods.

IMPROVEMENTS AT SAM’S, WALMART INTERNATIONAL
Sam’s Club had one of its best quarters in several years returning comp sales of 4% including fuel, and 2.8% without fuel.

Overall net sales grew to $14.864 billion, up 4.4% including fuel. Net income rose to $447 million, up 12.9%. Excluding fuel sales, net income totaled $397 million, up 4.2% year-over-year.

Sam’s Club said comp traffic rose 3.6% and as much as 0.70% to 0.90% of the 2.8% store comp came from the impact of recent hurricanes. Sam’s Club said membership income grew 0.9% over last year while inventory decreased 1% overall while comp club inventory fell by 3.5%.

Walmart International also put up strong numbers in the quarter with ten of the 11 foreign markets posting positive same-store sales. Net sales revenue rose to $29.548 billion up 4.1%, with operating income of $1.249 billion, down 7.8% year-over-year. Wal-Mart said the decline in operating income relates to $150 million in impairment charges related to store closures in some markets.

McMillon said Walmex stores performed well again this quarter with comp-sales growth of 7%.

“Last month, I visited stores in Mexico and was energized by how the team is improving each of our formats. Our stores and clubs are fun to shop. The team is also on their way towards a digital transformation. They’re changing how they work and that will bear fruit in the future. In Mexico, we’re providing convenience through initiatives like online grocery and we recently launched an eCommerce marketplace which expanded our general merchandise assortment by about 20%,” McMillon noted in the earnings transcript.

In the United Kingdom, Asda had positive comp-sales growth of 1.1%, with traffic down 1.4% but comp ticket growth of 2.5%. Net sales rose 3.6% in the period despite lower profits and lagging operating income. Last month, Wal-Mart announced another management change at Asda with Sean Clarke stepping down as CEO in January. Clarke is being replaced by Roger Burnley, a former executive with competitor Sainsbury.

Canada had comp sales of 1%, traffic was up 1% and comp tickets were flat. Net sales grew 1.9% with lower profits and operating income. China, the other large market for Wal-Mart, reported same-store sales of growth of 2.5% on slightly lower traffic. Overall comp-ticket was up 3.3% lifting net sales by 4%. Despite slightly lower profits, operating income in China was up.