Walmart Stores Inc. today reported financial results for the first quarter ended April 30, 2013.
Net sales for the first quarter were $113.4 billion, an increase of 1.0 percent over last year. Net sales last year benefited by 1.0 percent from the extra day due to leap year. On a constant currency basis, net sales would have increased 1.8 percent to $114.2 billion, according to a news release. Membership and other income increased 1.6 percent vs. last year, due primarily to an increase in membership income. Total revenue for the first quarter was $114.2 billion, a 1.0 percent increase over last year.
Consolidated net income attributable to Walmart for the first quarter was $3.8 billion, up 1.1 percent. Diluted earnings per share (EPS) attributable to Walmart were $1.14, a 4.6 percent increase, compared to $1.09 last year.
“In a quarter marked by considerable headwinds to top-line sales, Walmart delivered solid EPS growth of 4.6 percent,” said Mike Duke, Walmart Stores Inc. president and CEO. “Walmart’s mission is simple and focused—to help people save money so they can live better. When we simplify and focus our execution against this mission, it’s easy for our associates to prioritize what they have to do to serve our customers.
“I’m confident about our long-term strategy and the direction Walmart is headed,” Duke added. “Our expectations about our U.S. businesses’ performance, coupled with more discipline in International, will allow us to improve our performance throughout the year.”
Duke also noted that e-commerce sales grew more than 30 percent in the first quarter vs. last year.
“There is no doubt that our company is making the right investments in e-commerce to differentiate ourselves and become a better Walmart,” said Duke. “And with our sales growth in the first quarter, we believe our investments are paying off.”
The company’s operating expense leverage was relatively flat for the first quarter, but the commitment to leverage for the full year remains a priority, the news release says.
“We are proud that our U.S. segments leveraged operating expenses in the first quarter, and we expect them to continue leveraging,” said Duke. “To operate in a difficult sales environment requires disciplined expense and productivity management, the core of EDLC and EDLP. We are committed to have the total company achieve expense leverage for the year.”
“Although we believe our company will leverage expenses for the year, the second quarter will be challenging, given expense pressures in International and our corporate area,” said Charles Holley, EVP and CFO. “Expense leverage may not be delivered evenly across the quarters, but we believe that by executing our plans, we will continue to reduce expenses and improve productivity.”
“We deployed cash to grow our business and return value to shareholders,” said Holley. “Despite the multiple headwinds during the quarter, we grew operating profits ahead of sales growth. Our balance sheet is strong, and we continue to grow.”
During the first quarter, the company repurchased approximately 30 million shares for $2.2 billion. In addition, the company paid $1.6 billion in dividends. As previously announced, the company increased its dividend by 18 percent for fiscal 2014 to $1.88 per share.
Return on investment (ROI) for the trailing 12 months ended April 30 was 17.8 percent, compared to 18.1 percent for the prior trailing 12 months ended April 30, 2012. The decline was primarily the result of acquisitions, along with an increase in fixed assets within Walmart’s base business.
Walmart ended the quarter with free cash flow of $1.9 billion, compared to $3.1 billion in the prior year. An increase in income tax payments due primarily to changes in federal bonus depreciation rules and an increase in capital expenditures contributed to the free cash flow decline.
“Given current business and economic trends, including currency, we expect second quarter EPS to be in the range of $1.22 to $1.27,” said Holley. “Investments in global e-commerce initiatives were forecast to have an incremental $0.09 impact for fiscal 2014, and this remains in our guidance. We expect the Q2 impact to be in line with the $0.02 per share we had in the first quarter. In addition to e-commerce initiatives, expenses related to FCPA matters are expected to range from $65 to $70 million for the second quarter.”
Last year, Walmart delivered $1.18 in EPS for the second quarter.
Net sales, including fuel, were as follows:
• Last year’s net sales included an extra day for leap year, which added approximately 1.0 percent growth in the first quarter of last year.
• On a constant currency basis, Walmart International’s net sales would have been $33.8 billion, an increase of 5.4 percent over last year.
• Net sales for Sam’s Club, excluding fuel, were $12.2 billion, an increase of 0.5 percent from last year.
• Consolidated net sales, on a constant currency basis would have increased 1.8 percent to $114.2 billion.
“On a constant currency basis, Walmart International’s first quarter sales were $33.8 billion, up 5.4 percent. Our stores in the U.K., Africa, Mexico, Central America, Brazil, Chile, Argentina, China and India delivered positive comp sales,” said Doug McMillon, Walmart International president and CEO. “Comps in Canada and Japan declined. We grew our share in seven of our 11 markets.”
During the 13-week period, the Walmart U.S. comp was negatively impacted by a delay in tax refund checks, challenging weather conditions, less grocery inflation than expected and the payroll tax increase, the news release says. Comp traffic was down 1.8 percent, while average ticket increased 0.4 percent.
“Despite comps being lower than expected, we continued to generate market share gains,” said Bill Simon, Walmart U.S. president and CEO. “According to The Nielsen Co., we gained 20 basis points of market share in the measured category of ‘food, consumables and health and wellness/OTC’ during the 13 weeks ended Apr. 27, 2013.”
For the 13-week period ending July 26, Walmart U.S. expects comp store sales to increase from flat to 2.0 percent. Last year, Walmart’s comp sales rose 2.2 percent for the comparable period.
“The second quarter is off to a good start, with positive comps,” Simon said. “We continue to believe in the strength of our strategic plan to deliver a broad assortment with EDLP. We also continue to monitor the impact of the 2 percent payroll tax increase, along with other factors, like fuel prices.”
In the first quarter, Sam’s Club comp traffic was up 1.3 percent, while ticket was down 1.1 percent for the 13-week period ended April 26.
“Comp sales for the first quarter were impacted by unfavorable weather and less than expected inflation,” said Rosalind Brewer, Sam’s Club president and CEO. “Our business member is an integral part of our business, and comp sales and traffic patterns indicated that they remained pressured in the first quarter. Small business optimism remains at historically low levels, as businesses adapt to higher payroll taxes and cautious consumers.”
As of May 15, Sam’s Club increased its membership fee to $45 nationwide for both Advantage and Business base memberships, reflecting a $5 and $10 increase, respectively. The fee for Plus membership remains $100. This is Sam’s Club’s first fee increase since January 2006.
“The combination of our strategies, including our membership fee increase, positions us well for the second quarter, and we have a number of events to drive sales,” said Brewer. “Members will experience exciting merchandise, heightened by local brands, all displayed with a new level of visual excitement.”
Sam’s Club expects comp sales, excluding fuel, for the current 13-week period ending July 26 to increase from 1.0 to 3.0 percent. Last year, for the 13-week period, comp sales, excluding fuel, increased 4.2 percent.
Walmart U.S. and Sam’s Club will report comparable sales for the 13-week period ending July 26 on Aug. 15, when the company reports second quarter results. For fiscal year 2014, Walmart will report comparable store sales on a 53-week basis, with 4-5-5 week reporting for the fourth quarter.