Thursday, November 12, 2009

Walmart 3Q FY 2010 Earnings- Andrew Helfont

Wal-Mart announced better than expected earnings today, November 12th. Estimates for 3Q EPS were .78-.82, and actual EPS was .84, indicating a 3.2% in overall earnings. EPS estimates were increased from 3.50-3.60 to 3.57-3.61.

Net sales rose 1.1% from last years 3Q to 98.667B and on a constant currency basis, would have been higher, but due to unfavorable currency rates, there was a 2.617B loss.

Operating Segments

Wal-Mart US operating income rose 6.8%, due to productivity initiatives and efficient inventory management, compared to a sales increase of 1.2%. Customer traffice rose 1.5%, however there was a comparable store sales down .4% due to decreased purchases per customer. Management still believes that continuous gains in market share will underscore the underlying strength of the company.

Sams Club posted higher than expected membership income which was driven by its eValues program. Sales for sams club was 5.6% higher than last years 3Q. Gross and operating margins increased as well as expense reductions.

International stores sales increased 12.1% percent and operating income increased 9.2% percent. Wal-marts recent aquisition of Distribucion y Servicio (D&S), Chile's largest grocery store chain, has had an enormous positive impact for Wal-marts sales. As long as Wal-mart can further prove its price leadership and strong performance in international markets, it will continue to gain market share and further successfully expand its operations.

Going foward, there is speculation to believe as we are moving out of the 'recession', consumers may start to change their spending habits shifting people away from Wal-mart. However, if unemployment rates stay at 10.2%, Wal-mart sales are not seen to be diminishing anytime soon.

For the upcoming qaurter, the holiday season does not look as promising as retailers would have hoped. Wal-mart has fourth qaurter EPS estimates from 1.08-1.12, which raises FY 2010 EPS guidance. Wal-mart has further pushed their prices down to where almost competitors cannot compete. "We believe Walmart is positioned better than any other retailer to succeed with customers this holiday season" says Mike Duke, CEO.

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