Wal-Mart Stores, Inc. (Walmart) reported third quarter diluted earnings per share from continuing operations of $1.08, within guidance of $1.04 to $1.09. This was an 11.3 percent increase from the $0.97 per share reported for the third quarter last year.
The company updated its full year earnings guidance, narrowing the range by five cents to $4.88 to $4.93. The top of the range remains unchanged from the guidance provided last quarter, when the company tightened the range and increased it by a penny.
Net sales were $113.2 billion, a 3.4 percent increase over last year. Currency exchange rate fluctuations negatively impacted net sales by approximately $1.7 billion. Without the currency impact1, net sales would have been $114.9 billion, a 4.9 percent increase.
Walmart U.S. comparable (“comp”) store sales increased 1.5 percent in the 13-week period ended Oct. 26, 2012.
Sam’s Club comp sales, without fuel, increased 2.7 percent for the same 13-week period.
Walmart International grew net sales 2.4 percent to $33.2 billion; on a constant currency1 basis, net sales would have increased 7.6 percent to $34.8 billion.
The company leveraged operating expenses for the quarter.
Consolidated operating income was $6.1 billion, up 4.0 percent from last year, and grew faster than sales.
Walmart generated free cash flow1 of $7.0 billion for the nine months ended Oct. 31, 2012.
Return on investment1 (ROI) for the trailing 12 months ended Oct. 31, 2012 was 18.0 percent.
Year to date, the company returned $8.7 billion to shareholders through dividends and share repurchases.
BENTONVILLE, Ark., Nov. 15, 2012 — Wal-Mart Stores, Inc. (NYSE: WMT) today reported financial results for the quarter ended Oct. 31, 2012. Net sales for the third quarter of fiscal 2013 were $113.2 billion, an increase of 3.4 percent from $109.5 billion in the third quarter last year. Net sales for this quarter included a negative currency exchange rate impact of approximately $1.7 billion. Without the currency impact, net sales would have been $114.9 billion. Membership and other income increased 2.1 percent to $725 million. Total revenue was $113.9 billion, an increase of 3.4 percent from last year.
1 See additional information at the end of this release regarding non-GAAP measures.
Income from continuing operations attributable to Walmart for the quarter was $3.6 billion, up 8.7 percent from the third quarter last year. Diluted earnings per share from continuing operations attributable to Walmart (EPS) for the third quarter of fiscal 2013 were $1.08. By comparison, last year’s reported EPS were $0.97.
The current quarter benefited from a 31.3 percent effective tax rate. This benefit was mostly offset by approximately $105 million in pre-tax charges which are included in operating expenses:
an approximate $69 million for changes in estimated contingent liabilities related to employment claims in Brazil; and
an approximate $36 million for damages from Superstorm Sandy, mainly in the Walmart U.S. business.
Solid earnings performance
“We’re very pleased with our financial performance for the third quarter and the dedication and hard work of our associates serving Walmart customers and communities around the world,” said Mike Duke, Wal-Mart Stores, Inc. president and chief executive officer. “Earnings per share were $1.08, which represents an 11.3 percent increase over the third quarter last year.”
The company leveraged operating expenses for the third quarter, delivering on its commitment to reduce costs, improve productivity and invest in price.
“Our disciplined approach to operating the business and to the productivity loop drove profitability and expense leverage,” said Duke. “Our fundamentals are strong, and we are well-positioned for the fourth quarter, including innovative plans to drive traffic, especially in our U.S. stores.
“Price will continue to be a major factor for U.S. customers over the holidays. Our strong price position and broad assortment are clear competitive advantages,” he explained. “Across all of our markets, we are seeing the same price consciousness as we do in the United States. More customers are part of a growing global middle class, looking for quality, value and a better life, and our EDLP model matters to these customers.”
Duke also noted that the company continues to invest in e-commerce to build the anywhere, anytime relationship that customers want.
“We made significant progress this quarter in enhancing our walmart.com site for U.S. customers, and we are expanding e-commerce opportunities for shoppers in our key markets, including China, the U.K. and Brazil,” said Duke. “We also increased our position in China e-commerce retailer Yihaodian to 51 percent.”
Walmart delivered free cash flow of $7.0 billion for the nine months ended Oct. 31, 2012, compared to $3.4 billion the previous year. Return on investment (ROI) for the trailing 12 months ended Oct. 31, 2012 was 18.0 percent, compared to 18.2 percent for the same prior year period. The company’s capital discipline benefitted ROI. However, this benefit was mostly offset by currency exchange rate fluctuations.
“Despite current economic conditions, we continue to produce solid operating results with strong cash flow from operations,” said Charles Holley, executive vice president and chief financial officer. “The strength of our free cash flow allows us to provide good returns to our shareholders through dividends and share repurchases.”
Company updates full-year EPS guidance
“Current macroeconomic conditions continue to pressure our customers,” said Holley. “The holiday season is predicted to be very competitive, but we are well prepared to deliver on the value and low prices our customers expect.
“We consider the competitive retail environment and economic factors, among others, when we provide guidance. Based on these considerations, we expect fourth quarter fiscal 2013 diluted earnings per share from continuing operations to range between $1.53 and $1.58. This compares to last year’s fourth quarter reported EPS of $1.51, which benefitted $0.07 from certain items,” said Holley. “Net of those items, earnings per share for last year’s fourth quarter would have been $1.44.
“For the full year, we are tightening and reaffirming the top end of our earnings per share guidance to a range of $4.88 to $4.93. This compares to our previous guidance of $4.83 to $4.93,” Holley said. “Last year’s full-year EPS was $4.54.”