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In a statement, president and chief executive officer, Lee Scott said, "We are very pleased with our results this quarter. Despite economic difficulties around the world, we achieved solid sales and earnings growth and we are optimistic about the upcoming holidays. At a time when our customer is feeling the pressure of a tough economy, Wal-Mart's price leadership is more important than ever."
Consumer spending has declined sharply since the financial meltdown intensified in September. Shoppers, worried about their shrinking retirement funds and job security amid massive layoffs, are now focusing only on purchasing the basics in the uncertain economic climate. However, low-price retailers like Wal-Mart have fared better than the rest of the sector during the uncertain economic climate, as consumers search for deals in an attempt to save money.
Third Quarter Results
The Bentonville, Arkansas-based retail giant reported net income of $3.14 billion or $0.80 per share for the third quarter, higher than $2.86 billion or $0.70 per share in the year-ago quarter.
Results for the latest quarter include a loss from discontinued operations of $107 million related to store closures and property divestitures at Seiyu in Japan and a gain from discontinued operations of $212 million related to the disposal of Gazeley Ltd., which was sold in July 2008.
Income from continuing operations rose 6.6% to $3.03 billion from $2.85 billion last year. Earnings per share from continuing operations were $0.77, up from the prior-year quarter's $0.70.
On average, twenty-two analysts polled by First Call/Thomson Financial expected earnings of $0.76 per share for the third quarter. Analysts' estimates typically exclude special items.
Wal-Mart said prior-year results included a net benefit of $0.01 per share due to the recognition of $46.5 million in after-tax gains from the sale of certain real estate properties.
Wal-Mart's revenues for the quarter totaled $98.64 billion, up from $91.87 billion in the year-ago quarter. Sixteen Wall Street analysts had a consensus revenue estimate of $98.42 billion for the third quarter.
Total company net sales rose 7.5% to $97.63 billion from $90.83 billion in the same quarter last year. The company noted that price leadership, enhanced customer experience and operational improvements remained the primary drivers of sales growth worldwide. Sharper merchandising presentation at Wal-Mart U.S. and higher traffic at Sam's Club among both Business and Advantage members also helped sales growth.
Total U.S. comparable store sales without fuel were up 3.0% on top of a 1.5% rise in the previous year. With fuel, total U.S. comparable store sales rose 3.3%, while it increased 1.5% in the year-ago quarter.
Among Wal-Mart's rivals, Target Corp. (TGT | Quote | Chart | News | PowerRating) is scheduled to announce its third quarter results on November 17. Analysts are of the view that the company will earn $0.49 per share in the quarter on sales of $15.24 billion.
Segmental Details
Wal-Mart U.S. recorded third-quarter net sales of $61.16 billion, a 6.1% rise from the prior-year quarter. Total comparable store sales rose 2.7%, compared with a 1.0% rise last year, both with and without fuel. Operating income for the segment rose 7.3% to $4.29 billion from last year.
Total international sales rose 11.2% to $24.86 billion from the year-ago quarter. Segment operating income increased 10.6% to $1.18 billion from the prior-year quarter.
Sam's Club generated sales of $11.62 billion in the quarter, up 7.4% from the comparable quarter a year ago. Comparable store sales growth excluding fuel was 4.5%, while it increased 6.7% including fuel. For the prior-year quarter, Sam's Club's comparable store sales growth without fuel and with fuel was 3.9% and 3.8%, respectively. Operating income for the segment edged up 1.7% to $0.37 billion from the same quarter last year.
"International remains Wal-Mart's fastest-growing business, proving that our mission of saving people money so they can live better resonates with customers everywhere we do business," Scott added.
Other Metrics
Operating income for the third quarter rose to $5.29 billion from $4.96 billion in the prior-year quarter, while operating, selling, general and administrative expenses was $19.24 billion, up from $17.65 billion in the year-ago quarter.
Cost of sales for the latest quarter totaled $74.11 billion, higher than $69.25 billion in the comparable quarter a year ago.
The company ended the third quarter with cash and cash equivalents of $5.92 billion, compared to $5.55 billion at end of the prior-year quarter.
Nine-Month Highlights
For the nine-month period, Wal-Mart reported net income of $9.61 billion or $2.43 per share, higher than $8.64 billion or $2.11 per share in the year-ago period. Income from continuing operations rose to $9.46 billion or $2.39 per share from $8.75 billion or $2.14 per share in the prior-year period.
Wal-Mart's revenues for the year-to-date period totaled $296.49 billion, up from $271.13 billion in the same period last year. Total company net sales rose to $293.49 billion from $268.10 billion in the year-ago period.
Total U.S. comparable store sales without fuel were up 3.5% on top of a 1.4% rise in the previous period. With fuel, total U.S. comparable store sales rose 3.9%, while it increased 1.4% in the year-ago quarter.
Outlook
Looking ahead for the fourth quarter of fiscal year 2009, the company estimates comparable store sales in the U. S. to increase between 1% and 3%. The company also expects earnings from continuing operations in a range of $1.03 to $1.07 per share, including a projected negative effect of $0.06 per share related currency fluctuations. The Street is looking for earnings of $1.12 per share for the fourth quarter.
For fiscal 2009, Wal-Mart trimmed its forecast for earnings per share from continuing operations to a range of $3.42 to $3.46 from the prior guidance in the range of $3.43 to $3.50 per share. Analysts expect the company to report earnings of $3.49 per share for the full-year 2009.
Wal-Mart continues to believe that its strong value proposition is bringing more customers to its stores. The company is confident that the customers will continue to shop with it when the holiday season starts.
Early last month, Wal-Mart reduced prices on some of the most popular toys in 3,500 stores across the U.S., in view of Christmas. The company also said at that time that it would fast track the opening of Christmas shops in stores nationwide in the next 10 days.
A recent survey showed that consumers would start their Christmas shopping earlier and make other changes to help stretch their holiday cash. The 2008 Holiday Shopping Intentions Survey, conducted on behalf of Wal-Mart, found that more than one-third of Americans bought gifts for their children first. Wal-Mart has identified 10 popular toys, priced each at $10, to help parents. Throughout the season, Wal-Mart.com will offer free shipping with Site to Store on thousands of toys.
The current financial pressures and a lack of confidence in the economy will force shoppers to be very conservative with their upcoming holiday spending. Consumers could be frugal this season and less willing to splurge on discretionary items.
In September, the National Retail Federation, or NRF, released its forecast for the upcoming 2008 holiday season, projecting that sales will rise 2.2% this year to $470.4 billion. However, this gain would fall well below the ten-year average of 4.4% holiday sales growth and would represent the slowest growth since 2002, when holiday sales rose 1.3%.
NRF noted that a struggling housing market and rising unemployment accompanied by meager income gains will continue to hamper the consumer throughout the season. Food and energy costs will remain high. With the current financial industry crisis continuing to chip away at consumer confidence, NRF does not foresee an economic turnaround until the second half of next year.
Stock Quote
WMT closed Wednesday's regular trading session at $52.62, down $0.53 on a volume of 28.37 million shares, higher than the three-month average volume of 25.94 million shares. In the past 52-week period, the stock has been trading in a range of $43.11 to $63.85.
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