Walmart profits improve as U.S. sales struggle

BENTONVILLE, Ark. Expense control offset weak sales growth at Walmart during the second quarter, enabling the company to grow earnings per share by 9% to 97 cents, exceeding analysts’ estimates by a penny.

Total sales increased 2.8% to $103 billion and were aided by an $857 million currency exchange benefit that added a penny to the earnings per share figure, which fell within the company’s guidance range of 93 cents to 98 cents. Earning per share also benefitted as Walmart accelerated the pace of its share repurchase activity, spending $4.1 billion on stock buybacks during the period on top of $3 billion during the first quarter.

Profit growth was achieved by leveraging expenses, according to president and CEO Mike Duke, and that strategy will continue in the future.

“We continue to focus on our priorities of growth, leverage and returns. Despite the ongoing challenges of the global economy, we continue to grow our earnings and are reporting 97 cents per share today,” Duke said in a prepared statement. “We are raising our full year guidance to a range of $3.95 to $4.05. Our teams leveraged operating expenses for the third consecutive quarter, through their commitment to the productivity loop.”

Previously, full-year earnings per share were expected to fall within a range of $3.90 to $4.00.

Second-quarter profit growth occurred despite modest sales increases at the company’s three divisions. Sales at Walmart US were flat with the prior year at $64.7 billion, and same-store sales declined 1.8% on top of a prior-year comp decline of 1.5%. Operating profits declined 0.2% to $4.879 billion.

Sam’s Club’s sales, excluding fuel, increased 0.6% to $11.4 billion, same-store sales increased 1%, and operating profits increased 2.4% to $4.3 billion.

Internationally, where Walmart does not disclose same-store sales, total sales increased 7.3% to $25 billion, excluding the previously mentioned currency exchange benefit of $857 million. International operating income increased 16.8%, to $1.3 billion, compared with the same prior period, with currency exchange benefiting prior-year comparisons to the tune of $46 million.

“Our goal is to provide a consistently high return and [return on investment] is extremely healthy,” CFO Tom Schoewe said in a prepared statement. “We continue to deliver solid operating performance.”