Despite deceleration in sales momentum, Walmart expects profitable holiday season
BENTONVILLE, Ark. — Walmart maintained an optimistic outlook for the holiday season despite a 1.5% third-quarter comp increase that reflected a modest deceleration in sales momentum seen earlier this year.
Total company sales increased 3.4% to $113.2 billion, with the U.S. stores division advancing 3.6% to $66.1 billion — thanks to the combination of the 1.5% same stores sales increase and new store growth. Company profits increased at a slightly faster pace, with net income advancing 9.5% to $3.825 billion, and earnings per share increasing 11.3% to $1.08, a penny better than analysts’ forecast and toward the upper end of the company’s guidance range of $1.04 to $1.09.
Wal-Mart Stores president and CEO Mike Duke said the company was "very pleased" with its financial performance as the company achieved its goal of leveraging expenses to deliver on a 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," Duke said. "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."
Duke said Walmart’s strong price position and broad assortment would give the company a clear competitive advantage during the holidays in the U.S. and worldwide.
"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 said.
The company’s U.S. customers appeared to take a bit of a breather in advance of the holidays as same store sales growth of 1.5%, while within a guidance range that called for a 1% to 3% increase, was a modest deceleration from an on-plan 2.2% increase in the second quarter and an expectation beating 2.6% first-quarter increase. The first and second quarter gains came against prior year declines. However, the third-quarter figure marked the first time the company was up against a prior year increase, as the 1.3% gain in the third quarter of 2011 marked the first time Walmart’s U.S. comps turned positive after a two-year string of negative numbers.
"We again delivered strong sales across the business, adding $2.3 billion in revenue," said Walmart U.S. president and CEO Bill Simon. "We’re excited about the fourth quarter. November sales started ahead of plan. Our Black Friday plans are innovative and designed to drive additional traffic in our stores. We expect strong performance through Thanksgiving weekend."
The company forecast fourth-quarter comps will increase in the range of 1% to 3%, but it is up against a fourth quarter the prior year when same store sale increased 1.5%.
"Current macroeconomic conditions continue to pressure our customers," said Walmart CFO Charles 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."
For the full year, Walmart tightened, but didn’t increase its profit forecast to a range of $4.88 to $4.93 compared to prior guidance of $4.83 to $4.93.