Wal-Mart Earnings: Flat Same-Store Sales and Lowered Forward Guidance Disappoint

On Thursday, Wal-Mart reported earnings for the second quarter that revealed its continued struggle to revitalize sales in its domestic division.

Aug 14, 2014 at 2:56PM

G


Wal-Mart (NYSE:WMT), the world's largest retailer, lowered its forward earnings guidance and reported lackluster quarterly results this morning, thanks in part to a decline in customer traffic in its U.S. division.

The Arkansas-based giant has struggled over the last few years to deliver the phenomenal performance that investors came to expect over its first five decades of existence.

In 2012, it was hampered by an investigation into the company's business practices in Mexico -- and specifically its use of bribes to secure ideal locations. And last year, even though it's famous for logistics, Wal-Mart's U.S. division struggled to keep the shelves at its thousands of superstores stocked.

The troubles culminated in the recent and unexpected departure of former Wal-Mart U.S. CEO Bill Simon. In his place, the company promoted Greg Foran, who previously headed its operations in Asia.

All of the turmoil, plus apparent customer dissatisfaction weighed heavily on its latest results. Since the second quarter of 2010, domestic same-store sales have dropped in 14 out of 21 quarters. In the three months ended July 31, they were flat. 

G

"We wanted to see stronger comps in Walmart U.S. and Sam's Club, but both reported flat comp sales," said CEO Doug McMillon in today's earnings press release. "Stronger sales in the U.S. businesses would've also helped our profit performance."

The good news was that consolidated revenue increased over the quarter, growing by 2.8% to $120.1 billion, beating analysts' projections of $119 billion. Additionally, its diluted earnings per share of $1.21 were in line with Wall Street estimates and fell within the company's own previously issued guidance, calling for a range of $1.15 to $1.25 a share. 

Most concerning, however, was Wal-Mart's decision to lower its forward earnings guidance. It had previously forecast an earnings-per-share range of $5.10 to $5.45 for the full year. It now expects the figure to be between $4.90 and $5.15.

"Our guidance includes incremental investments in e-commerce and headwinds from higher health-care costs in the U.S. than previously estimated," said CFO Charles Holley in the earnings press release. "This guidance also assumes the effective tax rate will be around 34 percent for the third quarter."

The question going forward will be whether Wal-Mart's strategy to focus on its smaller Neighborhood Market and Express formats, the former of which saw comparable sales grow during the quarter by 5.6%, will make up for the disappointing trend at its superstores. And while the jury is still out, you'd be excused for refusing to count the retailer out just yet.

You can't afford to miss this
"Made in China" -- an all too familiar phrase. But not for much longer: There's a radical new technology out there, one that's already being employed by the U.S. Air Force, BMW and even Nike. Respected publications like The Economist have compared this disruptive invention to the steam engine and the printing press; Business Insider calls it "the next trillion dollar industry." Watch The Motley Fool's shocking video presentation to learn about the next great wave of technological innovation, one that will bring an end to "Made In China" for good. Click here!

John Maxfield has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers