What happened
Shares of Wal-Mart Stores, Inc. (WMT +0.50%) were surging Thursday after the retail giant delivered a blowout third-quarter earnings report. As of 10:52 a.m. EST, the stock was up 8.5%.
Wal-Mart reported its best comparable sales growth in more than eight years as sales at established stores in the U.S. climbed 2.7% on a 1.5% uptick in traffic. The growth in comparable sales was aided by a 50% jump in U.S e-commerce sales, which added 80 basis points to same-store sales growth. The company also beat estimates on the top and bottom lines.
Image source: Walmart.
So what
Wal-Mart's overall revenue increased 4.2% to $123.2 billion, ahead of expectations at $121 billion. While operating income declined 6.9% as the company stepped up investments in technology and lowered prices to be more competitive, adjusted earnings per share still increased from $0.98 to $1 with help from share buybacks and lower interest expenses.
In addition to strong results in the U.S., the international segment was solid with a 2.5% increase to $29.1 billion in constant-currency revenue as comparable sales increased in 10 of its 11 markets. Sam's Club was also a bright spot as comps excluding fuel increased 2.8% and operating income was up 12.9% to $447 million.
CEO Doug McMillon called the results "strong," saying, "We have momentum, and it's encouraging to see customers responding to our store and e-commerce initiatives."
Now what
Wal-Mart's guidance also delighted investors heading into the holiday quarter as it raised its full-year adjusted EPS guidance from $4.30-$4.40 to $4.38-$4.46, and called for comparable sales growth of 1.5% to 2% at Wal-Mart U.S. and Sam's Club.
This was a near-perfect quarter for Wal-Mart, and the results and outlook show that it's executing its turnaround strategy perfectly. Investors should have full confidence that the company will return to consistent profit growth next year, as promised.
