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Walmart Inches Past Estimates in 3Q

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The world’s largest retailer, Wal-Mart Stores, Inc. (WMT - Free Report) reported third quarter 2013 earnings of $1.08 per share beating the Zacks Consensus Estimate by a penny. Earnings were up 11.3% from the prior-year quarter earnings of 97 cents per share.

The third quarter fiscal 2013 results were within the company’s earnings guidance range of $1.04 to $1.09 per share. Top-line growth coupled with cost savings boosted earnings in the quarter.

Quarter in Detail

Total revenue climbed 3.4% to $113.9 billion (including membership and other income), missing the Zacks Consensus Estimate of $114.6 billion. The comparable store sales growth was overshadowed by the foreign currency headwinds, which impacted the top-line by $1.7 billion. Net sales, excluding currency impact, increased 4.9% to $114.9 billion.

Consolidated operating income increased 4.0% to $6.1 billion, driven by productivity improvements and cost savings. On a constant currency basis, operating income increased 4.5%.

Segment Details

Walmart U.S.: The segment posted net sales growth of 3.6% to $66.1 billion, including the impact of fuel sales, driven by positive comparable growth. Operating income increased 4.5% to $4.8 billion.

U.S. same-store sales increased 1.5%, driven by increase in average ticket and positive traffic. The growing traffic trend in its stores has helped the company post five consecutive quarters of positive same-store sales in this segment

Walmart International: Segment net sales, including fuel sales and currency impact, increased 2.4% to $33.2 billion. Excluding currency headwinds, international sales increased 7.6% to $34.8 billion.

Operating income increased 4.8% to $1.5 billion. Taking into account adjustments for constant currency, operating income for the segment grew 6.8% to $1.6 billion in the quarter.

Sam’s Club: The segment, which comprises membership warehouse clubs, posted net sales growth, including fuel impact, of 4.7% to $13.9 billion. Sam’s Club operating income, excluding fuel, increased 14.2% in the quarter.

Sam’s Club's comparable sales, excluding the impact of fuel sales, increased 2.7% in the quarter. The same store sales growth was within the guidance range of 3% to 5% and was driven by better quality and innovative merchandises.

Fourth Quarter Guidance

For the fourth quarter of 2013, Walmart expects its earnings to range between $1.53 and $1.58 per share. In addition, Walmart forecasts U.S. comp sales for the 13-week period from Oct. 27 through Jan. 25 to increase in the range of 1% to 3%. It expects Sam’s Club comp sales, without fuel, for this 13-week period to increase in the range of 1.5% to 3.5%.

Fiscal 2013 Guidance

For fiscal 2013, Walmart has tightened its guidance range to $4.88 to $4.93 from the prior forecast of $4.83 to $4.93. The Zacks Consensus Estimate for the fourth quarter and fiscal 2013 are pegged at $1.59 and $4.92 per share, respectively.

Our Recommendation

Walmart competes with Target Corp (TGT - Free Report) and currently has a Neutral recommendation. The stock carries a Zacks #3 Rank (a short-term Hold rating).

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