Wal-Mart (NYSE:WMT) turned in a decent quarter today (with earnings that exactly matched the consensus estimate). Investors shrugged off the numbers. The discount retailer, which is often examined to look for trends in consumer spending, also forecasts a happier holiday season ahead.
The retailer's third-quarter earnings increased 12.7% to $2.29 billion, or $0.54 per share. Net sales came in 9.7% higher at $68.5 billion, a little slim compared with what analysts were looking for. Meanwhile, domestic same-store sales showed a 1.7% increase, with Wal-Mart increasing just 1.3% and Sam's Club up 4%. Gross margin improved without the discount giant raising its trademark "falling prices."
In its conference call, Wal-Mart management continued to opine on the high price of oil and its negative impact on customers as a reason for the slightly skinny sales. You may recall it was a touch-and-go summer, what with hurricanes and oil prices supposedly preying on retail sales. However, even though back-to-school sales were in question for a while, they seemed to right themselves later.
Despite it all, Wal-Mart increased its guidance and primed us for the expectation of "a better Christmas than last year." Wal-Mart now expects to post earnings of $2.39 to $2.41 per share. It had previously forecast earnings of $2.36 to $2.40 per share.
The quarter might not have been highly exciting, but it still behooves investors to remember that with such a behemoth, robust growth is often difficult to achieve. Meanwhile, Wal-Mart is still up against very difficult comparisons to last year's same-store sales, for example. It's been said here before that the important thing is to keep an eye out for trends rather than sweat the day-to-day machinations too terribly much.
Meanwhile, Wal-Mart had encouraging words about the economy -- saying that while it has not been growing at the rate we would have liked, it is growing. Such words from Wal-Mart not only stir up hope for other discount retailers such as Target (NYSE:TGT), but also bode well for other retailers and consumer confidence in general.
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Alyce Lomax does not own shares of any of the companies mentioned.
