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Walmart U.S. is Q3 bright spot

11/17/2015

Despite weak overall sales growth and an expected decline in third quarter profits, Walmart’s third quarter results offered reasons for the company to be optimistic and for competitors to be concerned.



The company’s overall performance was uneven with sales growing at the massive U.S. stores division increasing 3.8% to $72.7 billion, but operating profits declining 8.6% to $4.5 billion. Same-store sales increased 1.5% on top of a 0.5% increase the prior year, marking the fifth consecutive quarter of comp growth. Especially strong same-store sales of 8% were generated by Walmart’s smaller format Neighborhood market stores.



The company’s international division was negatively affected by a strengthening of the U.S. dollar. Walmart International sales declined 11.4% to $29.8 billion and operating profits fell 6.4% to $1.3 billion. However, excluding the effects of currency fluctuations, Walmart International sales increased 3.2% to $34.7 billion. Sam’s Club’s total sales, negatively affected by lower year over year fuel prices, declined 2.2% to $14 billion. Excluding fuel, same-store sales advanced a meager 0.4% on top of a similar gain the prior year. Sam’s operating profits increased 9.3% to $539 million.



"We are pleased with the continued sales growth in Walmart U.S. and in our international business. Strong traffic and our fifth consecutive quarter of positive comps in Walmart U.S. stores show we are taking the right steps to win with customers,” said Doug McMillon, president and CEO of Wal-Mart Stores, Inc. “Although we still have work to do, we are positioning for sustainable growth through investments in people and technology to deliver a seamless shopping experience at scale."



Total company sales declined 1.3% to $116.6 billion and net income declined 11% to $3.3 billion. Earnings per share of $1.03 were better than the 97 cents analysts forecast, but 10.4% lower than the $1.15 a share the company earned in third quarter 2014.



“We delivered solid earnings per share that was well within our guidance,” said CFO Charles Holley.



The better-than-expected performance caused the company to tighten the range of its full year profit forecast to $4.50 from $4.65 from a forecast of $4.40 to $4.70 that was provided when second quarter results were reported on Aug. 18. That forecast had been a reduction from a projection provided back in February when full year profits were expected to range from $4.70 to $5.05.



As for sales, Holley said, “We continue to expect relatively flat total sales growth for the year. Without the currency impact, our full-year total net sales growth would be around 3%.”


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