March soft, first quarter on track at Wal-Mart

The market was underwhelmed Thursday morning by a 0.6% March same-store sales increase at Wal-Mart’s U.S. stores division, despite the company’s assertion that first-quarter sales and earnings would be at the high end of prior earnings guidance.

Share opened sharply lower at $50.04, from the previous day’s close of $52.61 as analysts were expecting a bigger number, despite the impact of a calendar shift in the Easter holiday. Health-and-wellness, home and grocery were the top-performing categories and customer traffic increased for the sixth consecutive month. But overall sales suffered as a result of a significant swing in the timing of Easter, which falls on April 11 this year, compared with March 23 last year. The shift was blamed for the modest same-store sales increase and reduction in average transaction size, but April results are expected to benefit.

“Based on the initial strength of our sales this week, we expect Easter to drive April sales performance,” said Wal-Mart vice chairman Eduardo Castro-Wright. “Clarity of offering, quality brands, unbeatable prices and strong operational execution are driving growth in multiple categories.”

Walmart was aggressive in its pursuit of Easter seasonal sales this year and directly targeted the chain drug channel in a national television campaign that portrayed Walmart as a less-expensive alternative for Easter products. In addition, the company continued to promote its $4 generic drug program on the cover of a circular distributed the week of March 29.

When March results are combined with actual results from February and anticipated results for April, Wal-Mart expects total U.S. same-store sales to be around the high end of a previously forecast range of 1% to 3% for the first quarter. As a result of the sales momentum and what CFO Tom Schoewe called, “expense control,” the company indicated first-quarter earnings per share would be toward the high end of the range of $0.72 to $0.77 provided in February.

“We remain well positioned for today’s economy,” Castro-Wright said. “People are choosing to spend money in key discretionary categories across the stores, and this is translating to improvement is several areas of our business, including home.”

Shares of Wal-Mart opened sharply lower from the prior day’s close of $52.61, despite the company’s assertion that once results for April are tallied, sales and earnings would be at the high end of earlier guidance