Higher grocery costs and spending on its e-commerce business masked better-than-expected sales growth for Wal-Mart, pushing earnings slightly below consensus. While U.S. same-store sales rose by 1.3%, the first increase in more than two years, earnings of $0.97 per share missed the Street view of $0.98.
The positive sales ended a nine-quarter streak of declining sales. Groceries cost the company about 4% more in the quarter; however, total cost inflation was 0.7% across the entire store due to lower television prices, price cuts and customers trading down to less expensive options according U.S. CEO Bill Simon.
CEO Mike Duke said the retailers’ customers remain concerned about the economy with a recent survey showing only one out of ten customers see the economy as “good.” That said, Duke believes sales momentum at Wal-Mart and Sam’s Club position the company “exceedingly well for the holidays.”
For the fourth quarter, the company expects earnings of $1.42-1.48 per share, up from $1.41 a year earlier and bracketing the consensus forecast of $1.45. Additionally, management thinks same-store sales will be flat to up 2.0% after falling 1.8% in the same period last year. At Sam’s Club, same-store sales (excluding fuel) are expected to rise by 4.0-6.0%, up form the 2.7% increase seen last year.
Wal-Mart (WMT : NYSE : US$57.46), Net Change: -1.43, % Change: -2.43%, Volume: 15,656,101
Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.
For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx