Stronger Dollar Clobbers International Numbers (Touchpoints by Andrew Jensen)

Wal-Mart International has been the Bentonville retailer’s fastest growing division for years and is projected to top $100 billion in sales for the first time during the 2009 fiscal year that ends Jan. 31.

As a percentage of total sales, International accounted for 24.2 percent in FY 2008 compared to 19.2 percent in 2006. The $90.6 billion in sales during 2008 was a 53 percent increase from $59.2 billion in 2006.

International net sales through 39 weeks are up 13.3 percent following the October sales report, but Wal-Mart has cautioned that earnings for the year will be impacted by the dollar’s rapid rally.

While Wal-Mart International saw an 8.9 percent increase in net sales year-over-year in October, the retailer had to write down that value by a whopping 14.8 percentage points, resulting in a negative net of 5.9 percent.

For the October 2007 period, Wal-Mart reported $7.2 billion in net sales internationally, and an 8.9 percent increase versus that number would be around $7.8 billion.

But thanks to the dollar’s steep increase against both the Euro and the British Pound during October, Wal-Mart’s international sales converted to dollars were $6.76 billion.

The dollar gained around 13 percent versus the Euro and around 11 percent against the Pound in October. The dollar moves in concert with the Japanese Yen, so Wal-Mart’s Seiyu sales weren’t as impacted as its Asda chain in Britain.

“It is what it is,” said Wal-Mart spokesman John Simley. “It’s worked the other way for the previous quarters.”

Currency fluctuations are a normal part of doing business internationally, Simley said, but the October dollar rally crammed months worth of movement into a few weeks.

“International is still the fastest growing part of the company,” Simley said. “The underlying business is strong and it shows that the Wal-Mart mission to help people save money and live better is relevant outside the U.S. It’s filling a need.”

However, while announcing third quarter earnings that beat Wall Street estimates on Nov. 13, Wal-Mart lowered its guidance for the fiscal year, citing an uncertain economy and the currency gyrations.

Wal-Mart chief financial officer Tom Schoewe trimmed the company’s fourth-quarter earnings outlook to between $1.03 and $1.07 per share.

“The rapid changes in currency exchange rates during the last few weeks are projected to negatively affect this year’s fourth-quarter results by approximately six cents per share,” Schoewe said in the release. “In U.S. dollar terms, strong operating performance in International may be overshadowed by these currency fluctuations.

“For the full year, ending January 31, we have tightened and modestly reduced our guidance and now forecast diluted earnings per share from continuing operations to be within a range of $3.42 to $3.46,” he said.

Of course, there are positive aspects to the dollar’s rise, not least of which are increasing purchasing power for American customers and a collapse in oil prices — now down more than 50 percent from summer peaks.

“We believe falling gas prices could help customers as we enter this holiday season,” Schoewe said