Top line troubles continue for Walmart

Walmart managed to achieve its third-quarter profit target despite reporting weaker than expected U.S. sales, which prompted the company to issue a tepid outlook for fourth-quarter sales at Walmart U.S. stores and Sam’s Club units.

The company said same stores sales during the quarter ended October 31 declined 0.3% at U.S. stores compared to a 1.5% increase the prior year while Sam’s Club mustered a 1.1% comp increase compared to a 2.7% increase last year. Through three quarters of the year, Walmart U.S. comps are down 0.7% and Sam’s Club is up 1%. Total Walmart U.S. sales increased 2.4% to $67.7 billion while Sam’s Club sales increased 1.1% to slightly more than $14 billion. Walmart International sales, including the negative effects of currency exchange, increased 0.2% to $33.1 billion. Total company sales advanced 1.6% to $114.9 billion. Without a $1.6 billion negative impact from currency exchange, total sales would have increased 2.7% to $116.2 billion.

Despite the weak top line showing, Walmart managed to generate profits that were a penny better than analysts forecast and within previously provided guidance. Net income increased 2.8% to $3.7 billion while earnings per share increased 6.5% to $1.14 compared to $1.07 last year.

Mike Duke, president and CEO of Wal-Mart Stores, Inc., characterized the profit performance as, “solid,” while emphasizing the need to grow top line sales.

“Walmart delivered solid earnings growth that was within our guidance range. We had strong operating income across our segments, with Walmart U.S. growing almost 6%, Sam's Club increasing more than 9%, and International up 8% on a constant currency basis," Duke said. “Our most important priority is growing top line sales, including comp sales. The retail environment, both in stores and online, remains competitive. Walmart has aggressive plans to help our customers enjoy the holiday season, and there is no doubt that we plan to win for our customers and shareholders throughout the holidays."

Walmart’s winning plan for the holidays involves expectations of flat same store sales at Walmart U.S. stores and comps at Sam’s that are flat to up 2%. In terms of profit, Walmart’s fourth quarter forecast envision earnings per share in the range of $1.50 to $1.60, including a 10 cent a share negative impact related to the closure of 50 stores in Brazil and China and the severing of a joint venture relationship in India.

"We managed our business well and delivered solid returns to shareholders," Walmart CFO Charles Holley said of the third quarter.

During the quarter, the company repurchased approximately 23 million shares for $1.7 billion and made dividend payments totaling $1.5 billion.

The company ended the quarter with 11,069 stores operating under 69 banners in 27 countries and e-commerce sites in 10 countries.