Walmart Reported Q2 2014
Walmart Stores, Inc., reported financial results for the second quarter ended July 31, 2014. Consolidated net sales for the second quarter were $119.3 billion, an increase of 2.8 percent over last year. This quarter included the negative impact of $696 million from currency exchange rate fluctuations. On a constant currency basis, net sales would have increased 3.4 percent to $120 billion. Membership and other income increased 8.2 percent versus last year. Total revenue was $120.1 billion, an increase of approximately $3.3 billion, or 2.8 percent.
Consolidated net income attributable to Walmart was $4.1 billion, an increase of 0.6 percent. Diluted earnings per share from continuing operations attributable to Walmart were $1.21, or 1.6 percent below last year’s $1.23.
“I’m pleased with our solid earnings-per-share performance,” said Doug McMillon, Walmart Stores, Inc., president and CEO, in a statement. “As it relates to the positives from the quarter, I’m encouraged by the performance of our International business, our Neighborhood Market sales in the U.S., and by our e-commerce growth. As it relates to our challenges in the quarter, we wanted to see stronger comps in Walmart U.S. and Sam’s Club, but both reported flat comp sales. Stronger sales in the U.S. businesses would’ve also helped our profit performance.”
He added. “We see opportunities to improve in merchandising, pricing, and store-level service in our supercenters, and we are working to close those gaps,” said McMillon. “Our investments in e-commerce and mobile are very important, as the lines between digital and physical retail continue to blur. Our customers expect a seamless experience, and we’re working to deliver that for them around the world.”
Returns
The company paid $1.55 billion in dividends and repurchased approximately 4 million shares for $307 million in the second quarter. In total, the company returned approximately $1.9 billion to shareholders through dividends and share repurchases.
Return on investment (ROI) for the trailing 12-months ended July 31, 2014, was 16.6 percent, compared to 17.9 percent for the prior comparable period. The decrease in ROI was primarily due to a decrease in operating income, as well as continued capital investment in store growth and e-commerce.
Free cash flow was $6.8 billion for the six months ended July 31, 2014, compared to $5.2 billion in the prior year. The increase in free cash flow was primarily due to the timing of income tax payments and capital expenditures.
Guidance
The company’s financial guidance reflects a view of global economic trends and assumes currency exchange rates remain at current levels. Forecasted earnings per share from continuing operations for the full year are expected to range between $4.90 and $5.15, versus previous guidance of $5.10 to $5.45. This assumes a range for third quarter EPS of $1.10 to $1.20.
“Our guidance includes incremental investments in e-commerce and headwinds from higher health-care costs in the U.S. than previously estimated. This guidance also assumes the effective tax rate will be around 34 percent for the third quarter. The annual effective tax rate is projected to be between 32 and 34 percent. The actual rate will depend on a number of factors, including our performance, discrete items, and pending U.S. Congressional actions regarding the extension of certain tax legislation,” said Charles Holley, executive vice-president and CFO, in a statement.
U.S. Comparable Store Sales Results
The company reported U.S. comparable store sales based on its 13-week and 26-week retail calendar for the periods ended August 1, 2014, and July 26, 2013. During the 13-week period, Walmart U.S. comp traffic decreased 1.1 percent, while the average ticket increased 1.1 percent. E-commerce sales positively impacted comp sales by approximately 0.3 percent for the 13-week period.
In the 13-week period, excluding fuel, Sam’s Club comp traffic was up 0.3 percent, and average ticket was down 0.3 percent. E-commerce sales positively impacted comp sales by approximately 0.3 percent for the 13-week period.
The company’s e-commerce sales impact includes those sales initiated through the company’s websites and fulfilled through the company’s dedicated e-commerce distribution facilities, as well as an estimate for sales initiated online, but fulfilled through the company’s stores and clubs.
Net Sales Results
Excluding the impact of currency exchange rate fluctuations, Walmart International’s net sales for the quarter would have been $34.6 billion, an increase of 5.3 percent over last year. Currency exchange rate fluctuations negatively impacted net sales by $696 million during the quarter.
Sam’s Club net sales, excluding fuel, were $13 billion for the quarter, an increase of 1.7 percent over last year. Excluding the impact of currency exchange rate fluctuations, consolidated net sales would have increased 3.4 percent during the quarter to $120 billion.
U.S. Comparable Store Sales Review and Guidance
“Neighborhood Markets continued to perform well and delivered an approximate 5.6 percent sales comp for the period,” said Greg Foran, Walmart U.S. president and CEO. “Comp store traffic grew 4.1 percent. During the second quarter, we opened 22 Neighborhood Markets and remain on track to deliver 180 to 200 new units for the year.”
For the 13-week period ending October 31, 2014, Walmart U.S. expects comp store sales to be relatively flat. Last year, Walmart’s comp sales declined 0.3 percent for the 13-week period ended October 25, 2013.
“Our top priority at Sam’s Club remains growth—growing our member base and growing sales,” said Rosalind Brewer, Sam’s Club president and CEO. “We’re taking steps to increase the value of membership through investments in Plus member cash rewards and the cash back Mastercard. It’s still early, but member response has been positive.”
Sam’s Club expects comp sales, excluding fuel, for the 13-week period ending October 31, 2014, to be slightly positive. Last year comp sales, excluding fuel, increased 1.1 percent for the 13-week period ended October 25, 2013.
ToyFest West 2015
ToyFest West announced that the 2015 dates are set for March 8–11. The show will, once again, be held at the South Point Hotel and Spa in Las Vegas. ToyFest West will offer the previous promotion of a free Monday night when attendees book Saturday and Sunday night at the host hotel. This offer is limited to the first 300 rooms booked. For more information, please visit www.toyfestwest.com.
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