Wal-Mart (WMT) Meets Expectations, But Future Modest

Despite improvement in the economy which is now seen at almost every turn, Wal-Mart (WMT) does not fell confident about the retail sector. It expects its same-store sales to rise only 2% at its core US Wal-Mart brand this quarter despite meeting Wall St. numbers.

Wal-Mart has such a large part of the US retail market that its figures are either a sign that the nascent recovery is a bit of a phantom, or it is losing market share to other firms. Since it has outperformed its industry for the last several quarters, the latter is unlikely.

Wal-Mart said its diluted earnings per share from continuing operations for the second quarter of fiscal year 2010 was $0.88, at the top of the company’s guidance of $0.83 to $0.88.

Net sales for the second quarter were $100.082 billion, a decrease of 1.4 percent from $101.546 billion in the second quarter last year. Without the negative impact of currency exchange rates equal to $4.199 billion, net sales for the quarter increased 2.7 percent to approximately $104.281 billion. Income from continuing operations increased to $3.449 billion from $3.401 billion in the same period last year.

While Wal-Mart’s fortunes have been improved by its international operations for the last several years, it was the flagship US Wal-Mart operations that carried the load in the last quarter. Sales in the unit rose 2%, while overseas sales dropped 8%. Operating income outside the US moved down by more than 10%.

Walmart U.S. expects comparable store sales during the 13-week period from Saturday, Aug. 1 through Friday, Oct. 30 to be between flat and two percent. Sam’s Club expects comparable club sales during the same period to be flat, plus or minus one percent.

“Based on our view of the economy and our continued focus on managing expenses and productivity, we are updating our guidance for earnings per share from continuing operations this year to a range of $3.50 to $3.60, from $3.45 to $3.60,” Tom Schoewe the CFO added. “We expect earnings per share from continuing operations for the third quarter of fiscal year 2010 to be between $0.78 and $0.82, including a three-cent negative impact from currency exchange rates.”

Douglas A. McIntyre