WMT 2009 Q3 Earnings

The world’s largest retailer, Wal-Mart Stores Inc. (WMT), reported the company’s quarterly performance on May 14. Wal-Mart posted flat earnings as overseas sales were affected substantially by the increased value of the U.S. greenback. However, faring much better than most retailers do during the current economic crunch, Wal-Mart has benefited from money-managing consumers who are strapped for cash and looking for bargains and necessities, rather than pricey and unneeded products.

For the 1Q, Wal-Mart recorded net income of $3.02B, or $0.77 per share, versus the previous year’s earnings of $3.02B, or $0.76 per share. Nevertheless, if not for the strength of the Dollar, the company’s net sales would have posted an increase of 4.5%, rather than the decline that Wal-Mart incurred.

As for the company’s overall sales, quarterly revenues came in at $94.24B, down less than 1% from last year’s sales of $94.94B. International sales through Wal-Mart stores were negatively affected by the current exchange rate that amounted to more than $4.8B. Meanwhile, the company’s net sales during the period slipped 0.6% to $93.47B.

The increased value of the U.S. Dollar has taken a severe toll on companies that have a large presence in the international markets. As the greenback’s value grow, companies, which generally exchange the country’s currency into Dollars, have seen their revenues decline as a result of the worsening economic turmoil.

Analysts, on average, were anticipating that the retail giant would record quarterly earnings of $0.77 per share on total revenues of $96.37B. Analysts typically exclude any special items from their projections.

"We're pleased to report that fiscal year 2010 is off to a very good start. These results were achieved in the face of a very challenging global economy. When economic conditions improve, we believe customers who shop Wal-Mart today will stay with us, because of the business improvements we're making and continue to make," affirmed Mike Duke, president and CEO of Wal-Mart. "Across the company, we are building our brand by reducing costs, sharpening our merchandising and updating our stores."

Looking further into the numbers, Wal-Mart posted net sales in the U.S. segment of $61.24B, up nearly 4% over last year’s results of $58.99B. Moreover, operating income within the segment gained more than 3% year-over-year to $4.46B.

Conversely, international sales declined during the quarter, falling more than 11%, from $23.93B the year before to $21.26B this year. In addition, the overseas sales market witnessed operating income slip more than 16% year-over-year, down to $880M.

As for Wal-Mart’s wholesale outlets, Sam’s Club, it saw sales drop 1.4% from last year’s results, posting revenues of $10.96B down from $11.12B in the same period last year. Operating income at Sam’s Club was flat, coming in at $390M.

A key economic indicator, same store sales, increased year-over-year for Wal-Mart, climbing 3.7% during the quarter without fuel sales and a 2.9% increase with fuel sales included in the data. This time last year, Wal-Mart posted same store sales increases of 2% without fuel and 2.5% jump with fuel. Take into account that this time last year, the price of oil was steadily marching toward $145 a barrel.

For the company’s upcoming 2Q, Wal-Mart representative have forecasted quarterly earnings to range between $0.83 and $0.88 per share, while analysts were looking for the company to post earnings of $0.85 per share.

"Our guidance takes into account Wal-Mart's strong underlying performance and the difficult economic environment. Plus, our U.S. businesses will be up against the economic stimulus checks in the second quarter last year,” acknowledged Tom Schoewe, CFO of Wal-Mart.

In other company news, Wal-Mart confirmed during the prior week that the company would no longer release their monthly comparable store sales data. The 13-week report will now become part of the company’s quarterly earnings statement and will now issue separate reports for Wal-Mart and Sam’s Club sales totals.

However, in the company’s latest same store sales report, for April, Wal-Mart made it known that revenues jumped 5%, excluding fuel sales. This compares to the previous year’s totals of a 3.1% increase. During the month, overall sales for April climbed nearly 2.5%, from $29.16B to $29.85B.

Furthermore, Wal-Mart announced last month that the company plans to reduce management positions that would involve pay cuts, relocation to other stores or outright loss of job. These cuts will take place primarily in China, which could affect upwards of 1,400 workers.

On the day of Wal-Mart’s earnings release, shares of WMT traded lower by 1.9% by the closing bell, falling $0.93 to end the session at $49.10 per share. Over the past year, Wal-Mart’s stock has traded within a range between $46.25 and $63.85 per share. At the current closing price, shares of WMT are only 6% off their yearly lows.

By BetterTrades