Wal-Mart Dec. comps excl. fuel up 1.7%, total sales down; cuts Q4 earnings view - update

(RTTNews) - Retail giant Wal-Mart Stores, Inc. (WMT | Quote | Chart | News | PowerRating) Thursday reported a 1.7% rise in its total U.S. comparable store sales, excluding fuel, for the month of December. Including fuel, total U.S. comparable store sales were up 1.2%. The company also posted a 0.1% drop in total net sales for the month. Looking forward, Wal-Mart lowered its earnings outlook for the fourth quarter.

Walmart U.S.

For December, Walmart U.S. posted comparable store sales growth of 1.9%, in comparison with 2.6% growth in the year-ago month. "Due to the difficult economy and severe winter weather in some regions, the holiday season was more challenging for retailers than expected," said Eduardo Castro-Wright, vice chairman, Wal-Mart Stores, Inc.

"We are pleased that we had positive traffic for the third month in a row and that Walmart performed relatively well given the environment," Castro-Wright noted.

According to the company, grocery and health and wellness were the primary sales drivers for Walmart U.S., with mid-single digit comparable store sales results. While Electronics sales were solid, apparel and jewelry witnessed softness in sales. Weather conditions also slowed sales in several areas of the country during the week before Christmas, forcing the closure of 40 stores for periods ranging from two hours to nine days.

"We believe we continue to gain market share on the strength of positive traffic in response to Walmart's price leadership, as well as overall customer experience improvements," Castro-Wright added.

Additionally, sales at walmart.com were significantly higher than last year, driven by the sales of entertainment and home products and the site-to-store program, Wal-Mart noted.

Sam's Club

Sam's Club's December comparable store sales growth before the fuel impact was 0.1% versus 1.3% in the previous year. Inclusive of fuel, Sam's Club delivered comparable store sales decline of 3.2% in December, compared with a rise of 3.4% in the prior-year month.

Overall, sales for the holiday season at Sam's Club were below expectations, the company noted. Sales results were softer in the first three weeks, with improved performance during the last two weeks of the December period. Winter storms negatively impacted traffic and sales in some markets. Although traffic increased for both Business and Advantage members, average ticket declined for both.

The company also said that sales strengths continued in fresh food, dry grocery and consumables. Continued softness in general merchandise had a greater negative impact on sales during this period. Jewelry and home-related products were among the softer categories.

"Our members were clearly cautious with their discretionary spending. Our small business members in particular continue to face more pressure from today's economy and also are more selective in their purchases, said Doug McMillon, Sam's Club president and chief executive officer.

Additionally, continued significant declines in fuel prices resulted in reduced fuel sales in comparison to last year.

Dec. Net Sales

Net sales for December reached $46.51 billion, down from $46.57 billion last year. Walmart U.S. generated December net sales of $30.97 billion, a 4.3% rise from the prior-year month's $29.69 billion. Sam's Club's sales dropped 2.1% to $4.83 billion from $4.94 billion in the year-ago December.

Wal-Mart International

On a reported basis, the International segment's net sales totaled $10.71 billion, down 10.4% from $11.95 billion a year earlier. On a constant currency basis, Wal-Mart's International sales increased 8.3%. According to the company, the impact of the strengthening of the U.S. dollar was 18.7 percentage points. In addition, the International sales figures have been revised to reflect the pending closure of 23 stores in Japan that are now considered discontinued operations.

"Our customers around the world continue to feel pressure from the current global economy, leading to sales for Wal-Mart International that were below expectations," said Mike Duke, vice chairman, Wal-Mart Stores, Inc.

In the U.K., ASDA experienced one of the company's strongest Christmas sales seasons, resulting in a quarter of strong comparable store sales, without fuel. Sales were strongest in core grocery and George apparel. During the week before Christmas, traffic rose significantly ASDA had record sales for a single day on December 23.

For the December period, Wal-Mart de Mexico's comparable store sales increased 0.6%, reflecting the country's continued economic slowdown. Superama stores showed the strongest comparable store sales, the company noted.

At Wal-Mart Canada, comparable store sales were in the low single digits for December, driven by higher average ticket and strong sales following Christmas, the company said. Food and consumables, as well as electronics, seasonal and cold weather categories performed well. Meanwhile, apparel sales were weaker than expected.

In December, Wal-Mart Brazil opened 11 new stores, more than in any month since Wal-Mart entered Brazil in 1995.

The company's comparable store sales in Japan were positive, driven by the shift to every day low pricing in food and consumables and solid customer response to direct import items. Sales in general merchandise and apparel were soft due to the general downturn in the economy. In addition, higher average ticket led to comparable store sales growth in the mid single digits at both Wal-Mart China and Trust-Mart.

Year-To-Date Results

Wal-Mart reported Total U.S. comparable store sales growth without fuel of 2.8% for forty-eight weeks ended on January 2, compared with 1.5% a year ago. Including fuel, total U.S. comparable store sales rose 3.1% on top of a 1.6% rise in the prior-year period. The company also reported year-to-date net sales of $370.52 billion, up 6.5% from $347.75 billion in the previous year.

Competitors

Membership warehouses operator Costco Wholesale Corp. (COST | Quote | Chart | News | PowerRating) Thursday reported a 4% drop in same-store sales for December, citing lower gasoline prices and foreign exchange losses. Excluding these negative impacts, the company's total comparable sales grew 4%. The Issaquah, Washington, D.C.-based company's net sales were $7.40 billion for the month, down 2% from last year.

Another peer, Target Corp. (TGT | Quote | Chart | News | PowerRating) reported a 0.2% rise in December net retail sales to $9.28 billion. The company's December comparable-store sales were down 4.1%.

Outlook

Going forward, Wal-Mart expects comparable store sales for the January four-week period to be between flat and 2%. The January period runs from January 3 through January 30. The company is scheduled to report January sales on February 5.

"The current economy remains challenging for all businesses, and retailers have already seen customers pull back on discretionary spending. Consumers are very focused on value and necessities," said Tom Schoewe, executive vice president and chief financial officer.

Further, the company now expects fourth-quarter earnings per share from continuing operations between $0.91 and $0.94, down from its previous guidance range of $1.03 - $1.07. Analysts expect earnings of $1.06 per share for the quarter. Analysts' estimates typically exclude special items.

"Considering the impact of currency and litigation charges, we continue to expect our underlying operating performance for the fourth quarter of fiscal 2009 to be at or above the prior year's quarter," Schoewe noted. According to him, fourth-quarter sales for Sam's Club and Wal-Mart International are trending below the company's expectations and expenses are higher than anticipated.

The company is slated to announce its fourth-quarter earnings on February 17.

WMT is trading at $51.53, down $4.01, on a volume of 46.15 million shares.

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