Has Walmart really turned the corner on comps?

Walmart gave investors an early Christmas gift earlier this week in the form of a long-awaited third-quarter same-stores sales increase, then ruined the holiday spirit by coming up a penny short of analysts’ earnings estimates.

The 1.3% comps increase ended two years of negative numbers and exceeded the upper end of the company’s guidance range that was set at 1%. The improvement was vindication of sorts, as Walmart has spent the past 18 months repositioning its business and asserting the changes would eventually yield results. And they did, even if the magnitude of the increase is rather modest and aided somewhat by inflation. Still, an increase is an increase, and competitors felt the inflation tailwind too. So now it seems the company is at one of those proverbial inflections points with the holiday season and fourth quarter set up to provide new evidence of whether the considerable effort expended during the past year has the company poised for greater things in 2012. Walmart obviously believes that is the case.

“We’ve continued to diligently execute on our core initiatives, and we see clear signs that our strategy is working,” said Walmart U.S. president and CEO Bill Simon. “We’re encouraged by the continued response we’re receiving from our customers. Following a positive comp in July, we continued to gain momentum, achieving positive comps for each successive month, with the strongest results in October.”

Total sales at U.S. stores increased 2.7% to $63.8 billion.

Walmart spent much of this year repositioning its domestic business and was intent on demonstrating the return to its core strategy of offering everyday low prices on a broad assortment of merchandise would resonate with shoppers and produce sales growth even in a challenging economy.

“Three key elements drove the comp improvement in the third quarter,” Simon said. “Our focus on expanded assortment, product innovation and local relevance improved merchandise offerings throughout the store and customers responded. Productivity initiatives improved in-stock levels, and we continue to drive price leadership in all our stores.”

The improved sales results contributed to third-quarter earnings per share of 97 cents, which was two cents better than the prior year when earnings of 95 cents a share were inflated by a tax benefit of five cents a share. Despite the improvement, the figure was a penny shy of analysts’ consensus estimate of 98 cents, but squarely within the company’s guidance range that called for earnings per share of 95 cents to $1.

Looking more broadly at the entire company, Wal-Mart Stores Inc., president and CEO Mike Duke characterized the third-quarter profit performance as solid and said each of the company’s business segments -- U.S. stores, International and Sam’s Club -- is stronger today than it was a year ago.

“Both Walmart U.S. and Sam’s Club exceeded comp-sales guidance, and I’m pleased that the sales momentum positions us exceedingly well for the holidays,” Duke said. “We also are pleased with the growth in both sales and operating income for Walmart International.”

Looking ahead, Walmart said it expects fourth-quarter earning in a range of $1.42 to $1.48, which encompasses analysts’ consensus estimate of $1.45 per share.