Wal-Mart (WMT) Tops Q1 Earnings On Higher Comps & Traffic
Zacks Investment Research | May 17, 2017 09:48PM ET
Wal-Mart Stores Inc. (NYSE:WMT) reported better-than-expected earnings in first-quarter fiscal 2018, while revenues marginally lagged the Zacks Consensus Estimate. Shares were down 0.16% in the pre-market trading session.
Wal-Mart’s first-quarter fiscal 2018 earnings of $1.00 per share beat the Zacks Consensus Estimate of 96 cents by 4.2% and increased 2.0% from the year-ago earnings of 98 cents on higher comps. Earnings reached the top end of the guided range of 90 cents to $1.00 per share.
Quarter in Detail
Total revenue came in at $117.5 billion (including membership and other income). The figure fell short of the Zacks Consensus Estimate of $117.6 billion by 0.07% but increased 1.4% year over year. Currency impacted sales by approximately $1.21 billion. The decline in the International business was more than offset by growth in sales at Wal-Mart U.S and Sam’s Club divisions. On a constant currency basis, revenues improved 2.5% to $118.8 billion.
Total revenue comprised net sales of $116.5 billion (up 1.3% from the year-ago quarter and up 2.4% on a constant currency basis) and membership and other income of $1.0 billion (up 10.7% year over year).
Operating income declined 0.7% to $5.24 billion in the reported quarter as the company continued to invest in e-commerce initiatives to compete with the online retailer Amazon.com, Inc. (NASDAQ:AMZN). Currency had a negative impact of $106 million on the same. On a constant currency basis, operating income increased 1.3%.
Wal-Mart’s shares have rallied 8.7% on a year-to-date basis, higher than the Zacks categorized Retail-Supermarkets industry’s growth of 5.3%.
Segment Details
Wal-Mart U.S.: The segment posted net sales growth of 2.9% to $75.4 billion in the reported quarter, including the impact of fuel sales. Operating income increased marginally by 0.9% to $4.3 billion, despite incurring huge expenses as a result of e-commerce initiatives.
U.S. same-store sales (comps) for the 13-week period ended Apr 28 increased 1.5% compared with 1.0% comps growth in the prior-year quarter. This was the 11th consecutive quarter of positive comps. Comp sales growth reached the top end of the company’s expectations of 1−1.5% increase. While comp traffic improved 1.5%, average ticket declined 0.1% in the quarter. The impact of rising consumer spending was seen in improved traffic during the quarter. e-commerce sales positively impacted comp sales at Wal-Mart U.S. by 0.80%.
Get The News You Want
Wal-Mart International: Segment net sales, including fuel sales, declined 3.5% year over year to $27.1 billion. The same, however, increased 0.8% on a constant currency basis to $28.3 billion. Operating income declined 0.1% to $1.16 billion. On a constant currency basis, it grew 9.0%.
Sam’s Club: The segment, which comprises membership warehouse clubs, posted net sales growth, including fuel impact, of 2.8% to $13.9 billion. Sam’s Club operating income increased 0.2% to $414 million in the quarter.
Sam’s Club comps, excluding the impact of fuel sales, rose 1.6% compared with a growth of 0.1% in the prior-year quarter. Comp sales growth was better than the company’s expectations of around 1% growth. Comp traffic grew 1.1%, while ticket increased 0.5%. e-commerce sales positively impacted comps by approximately 0.8% in the quarter.
Other Financial Updates
Wal-Mart ended the quarter with cash and cash equivalents of $6.55 billion, total long-term debt of $33.8 billion, long-term capital lease obligations of $6.3 billion and shareholders’ equity of $76.1 billion.
At the end of first-quarter fiscal 2018, Wal-Mart generated cash flow from operations of $5.39 billion and incurred capital expenditures of $1.99 billion, resulting in free cash flow of $3.39 billion.
Wal-Mart paid $1.55 billion in dividends during the quarter. The company repurchased about 31 million shares worth $3.7 billion in the quarter, with shares worth $7.0 billion remaining out of $20 billion authorized in Oct 2015.
Guidance
Second-Quarter Fiscal 2018
Wal-Mart expects U.S. comp sales growth in the range of 1.5−2.0% for the 13-week period ending Jul 28. Sam’s Club comp sales, without the impact of fuel sales, are expected to increase 1–1.5%. The company expects adjusted earnings in the range of $1.00–$1.08 per share.
Fiscal 2018
The company has not provided any update on fiscal 2018 guidance during the current quarter. In fourth-quarter fiscal 2017, the company had forecasted adjusted earnings in the range of $4.20−$4.40 per share, assuming full-year effective tax rate around 32%.
Our Take
Despite the company’s efforts to boost sales and regain investors’ confidence, it still faces many headwinds, which are likely to impact earnings in the near term. Higher e-commerce investments, declining international sales and currency headwinds are also expected to impact the results negatively.
Zacks Rank and Key Picks
Wal-Mart currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the retail sector are Rocky Brands, Inc. (NASDAQ:RCKY) , The Children’s Place, Inc. (NASDAQ:PLCE) and Sequential Brands Group, Inc. (NASDAQ:SQBG) . While both Rocky Brands and Children’s Place sport a Zacks Rank #1 (Strong Buy), Sequential Brands carries a Zacks Rank #2 (Buy). You can see .
Rocky Brands posted a positive surprise of 42.9% in the preceding quarter. While Children’s Place has expected long-term earnings growth of 8.00%, Sequential Brands has expected long-term earnings growth of 15.0% for the next three to five years.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
Original post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.