Daily Management Review

Amidst a Flurry of Bad Retail Results, Wal-Mart Announces Better than Expected Results in 3rd Quarter


11/17/2015




Amidst a Flurry of Bad Retail Results, Wal-Mart Announces Better than Expected Results in 3rd Quarter
Wal-Mart shares went up by 2% as investors were pleased with the better than expected results for the third quarter of the current fiscal and posted more profits than anticipated by analysts on Tuesday.  
 
Heavy investing by the company on its people and technology were anticipated to hamper the results of the company, Wal-Mart had warned investors barely a month before the earnings were announced on Tuesday. Since the warning announcement by the company, its stock suffer its worst loss in 15 years as the investors were found running for the exits following the dim outlook announcement by the company.
  
The existing U.S. Wal-Mart stores saw sales and revenue rise by 1.5 % as more customers came into its stores which helped the company recorded a fifth straight quarter of positive sales as the records were posted on Tuesday.
 
The net income however came down in this quarter compared to the same period a year ago. Wal-Mart recorded a net income of $3.3 billion, or $1.03 per share compared to $3.7 billion, or $1.15 per share, in the same period a year ago. This was however more than the 98 cents that the analysts were looking for and had predicted.
 
“We are taking the right steps to win with customer. We still have work to do,” said CEO Doug McMillon, noting positive comparable sales growth and strong traffic.
 
The operating income of the company reduced by 8.8% due to the company’s spending on initiatives like higher employee wages and a more robust e-commerce platform continued in the quarter.
 
A dent in its results and weak international sales of Wal-Mart is being caused by continued challenged faced by the company by currency headwinds.
 
While the analysts estimated total revenue of $117.8 billion, the company clocked total revenue of $117.4 billion which was 1.3% lower than the predictions. Company sources said that the revenue would have risen by 2.8% but for the challenges faced due currency headwinds. The increase in sale in US was offset by a drop in 11.4% in international sales.
 
Based on the current trends, the company estimates that for the current quarter, the earnings would be $1.40 to $1.55 per share which at the higher end trounce analyst estimates of $1.43 per share.
 
Despite the better than expected results in the third quarter, the company still expects total sales to be flat this year. Without the currency impact, they would have risen about 3%, the company said.
 
In a period where most of the retailers have done poorly and there has been a flurry of bad retail results including Macy’s and Nordstrom, Wal-Mart’s earning report comes as a breath of fresh air for the industry. Best Buy and Target will report later this week.
 
Wal-Mart’s stock rose over 2% to $59.14 in pre-market trading on Tuesday, but is down 31% this year.
 
(Source:www.forbes.com & www.reuters.com) 






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