Wal-Mart Profit Climbs, Earnings Forecast Increased
Wal-Mart Says Profit Climbs 3.6%
Paulo Fridman/Bloomberg
Sales abroad rose 7.3 percent on a constant currency basis as the retailer’s expansion in Mexico, China and Brazil helped counter the 1.8 percent sales drop at U.S. Wal-Mart stores open at least a year.
Sales abroad rose 7.3 percent on a constant currency basis as the retailer’s expansion in Mexico, China and Brazil helped counter the 1.8 percent sales drop at U.S. Wal-Mart stores open at least a year. Photographer: Paulo Fridman/Bloomberg
Aug. 17 (Bloomberg) -- David Strasser, an analyst at Janney Montgomery Scott LLC, talks about Wal-Mart Stores Inc.'s second-quarter profit reported today and business strategy. The world's largest retailer said net income rose 3.6 percent to $3.6 billion, or 97 cents a share, and boosted its earnings forecast for the year. Strasser speaks with Margaret Brennan on Bloomberg Television's "InBusiness." (Source: Bloomberg)
Aug. 18 (Bloomberg) -- Matt Arnold, an analyst at Edward Jones & Co. in St. Louis, talks about Wal-Mart Stores Inc.'s financial results. Wal-Mart, the world’s largest retailer, reported a 3.6 percent gain in second-quarter profit as growth abroad helped make up for sales declines in the U.S. The company boosted its profit forecast for the year. Arnold talks with Bloomberg's Susan Li. (Source: Bloomberg)
Aug. 17 (Bloomberg) -- Joseph Feldman, an analyst at Telsey Advisory Group, talks about Wal-Mart Stores Inc.'s second-quarter profit reported today and outlook. The world's largest retailer said net income rose 3.6 percent to $3.6 billion, or 97 cents a share, and boosted its earnings forecast for the year. Feldman speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Wal-Mart Stores Inc., the world’s largest retailer, reported a 3.6 percent gain in second-quarter profit as growth abroad helped make up for sales declines in the U.S. The company boosted its profit forecast for the year.
Net income advanced to $3.6 billion, or 97 cents a share, meeting the average of estimates compiled by Bloomberg. Profit will be as much as $4.05 a share for the year, compared with an earlier top range of $4, the Bentonville, Arkansas-based company said today in a statement.
Sales abroad rose 7.3 percent on a constant currency basis. The retailer’s expansion in Mexico, China and Brazil helped counter the 1.8 percent sales drop at U.S. Wal-Mart stores open at least a year, the fifth consecutive quarterly decline.
“International is starting to matter more to investors,” said David Abella, portfolio manager at Rochdale Investment Management in New York, which manages $2.9 billion including Wal-Mart shares. “Sales are up to a point where investors are starting to think it’s more of a driver to earnings growth.”
Wal-Mart rose 61 cents, or 1.2 percent, to $51.02 at 4 p.m. in New York Stock Exchange composite trading. The shares have declined 4.5 percent this year.
Total international sales rose 11 percent to $25.9 billion. Comparable store sales rose 6.1 percent in China, where Wal-Mart plans to open its 300th store next month. Chief Executive Officer Mike Duke dubbed the overseas business an “impressive growth engine” on a conference call today.
Duke has cut prices on cereal, detergent and other items to lure U.S. consumers as they struggle to recover from the worst recession since the 1930s. The so-called price rollbacks didn’t generate the sales or traffic the company had anticipated, according to U.S. stores chief William Simon.
Action Alleys
“We recognize it will take time to see significant changes in our comps and that the U.S. economy remains challenging,” Simon said on the call. “Gas prices and unemployment continue to influence how our core customers shop. Customers are spending cautiously.”
Simon said the company has restored “thousands” of products that had been removed amid previous inventory reductions, including rice and beans and some lines of cat food. Low-priced merchandise displays in the front of stores -- so- called Action Alleys -- have also come back over the past six weeks, he said. Simon expects to see improvement in sales by the fiscal fourth quarter.
“Wal-Mart is working to rediscover its roots and simplify the business,” said Stifel Nicolaus & Co. analyst David Schick in a telephone interview. The Baltimore-based analyst recommends holding the shares.
U.S. Food
Sales of food in the U.S. increased in the quarter, Simon said, particularly fresh produce such as strawberries. Sales of apparel, home furnishings, and entertainment declined.
Overall revenue in the three months ended July 31 advanced 2.8 percent to $103.7 billion. Analysts on average projected $105.5 billion. Wal-Mart forecast third-quarter profit of 87 cents to 91 cents a share, compared with the 91-cent average of estimates compiled by Bloomberg.
In July, sales at U.S. retailers rose less than economists projected, signaling restrained spending and consumer confidence until companies start hiring again. After boosting payrolls by 200,000 workers on average in March and April, companies scaled back the pace of hiring to an average 51,000 over the past three months.
Gross domestic product will expand at an average 2.55 percent annual rate in the last six months of 2010, according to the median of 67 estimates in a Bloomberg survey taken July 31 to Aug. 9, down from the 2.8 percent pace projected last month.
Home Depot Performance
Home Depot Inc., the largest U.S. home-improvement retailer, today reported second-quarter profit that exceeded analysts’ estimates as U.S. sales rose 1 percent.
Wal-Mart rival Target Corp. is scheduled to report results tomorrow. Both are seeking a bigger chunk of back-to-school spending, the second-biggest sales period in the U.S. after the winter holidays. Simon said early back-to-school sales indicate that customers are shopping closer to the opening of school.
In July, the National Retail Federation estimated back-to- school spending would top $55 billion in the U.S. this year, up 16 percent from $47.5 billion last year. Evidence is mounting that the group’s estimate was too optimistic, according to John Canally, an investment strategist and economist for Boston-based LPL Financial.
The slowing economic recovery could spur deal making, Wal-Mart chief financial officer Tom Schoewe said in a telephone interview.
New Deals?
“Right now the environment, while difficult for our customers, is better from an M&A standpoint,” he said. “This is when opportunities get to be greater, and we will seize those opportunities.”
In May, Wal-Mart’s Asda Group Ltd. agreed to buy U.K. discount retailer Netto for $1.13 billion, and international chief Doug McMillon said in June that the company has pursued several acquisitions in Russia, where it currently does not have any stores.
“I think an international acquisition could get investors more interested,” said Rochdale’s Abella. Wal-Mart ended the quarter with about $4.5 billion in free cash flow, compared with $4.2 billion a year ago.
Three top Wal-Mart executives have either left or received new assignments in the past six weeks. The merchandising chief and the head of its apparel business have departed, and former U.S. stores chief Eduardo Castro-Wright is now heading global sourcing and Internet operations. Simon, an executive vice president who joined the company in 2006, is now running U.S. stores.
To contact the reporter on this story: Matthew Boyle in New York at Mboyle20@bloomberg.net
Rate These Stories
Rate this Page