Wal-Mart produces record sales in weak economy
BENTONVILLE, Ark. Wal-Mart’s first-quarter financial results topped analysts’ estimates by a narrow margin, but shares of the company were trading lower Tuesday morning as executives expressed concern about the economic environment.
Total company sales for the quarter ended April 30 increased 10.2 to $94.1 billion and net income increase 6.9 percent to slightly more than $3 billion. Earnings per share of $0.76 exceeded analysts’ estimates by a penny and increased 11.7 percent from $0.68 per share during the comparable period the prior year.
President and chief executive officer Lee Scott attributed the company’s performance to broad based strength across its U.S., international and Sam’s Club business segments combined with a low price image that resonates with consumers during periods of economic weakness.
“We continue to deliver against the business model that Sam Walton started, selling branded merchandise for less,” Scott said. “Our business is even more relevant to our customers today given the current economic pressures.”
That was particularly true in the U.S. where store division president and chief executive officer Eduardo Castro-Wright said customer traffic increased for the first time in several years and customer service scores are at an all time high. He added that the company’s U.S. grocery, health and wellness and entertainment businesses remained strong and the corner has been turned in the apparel business where a return to basic items selling for less than $10 has been well received by consumers.
Sales at the stores division increased 6.6 percent to $59 billion while operating income increase 9.6 percent to $4.4 billion and same store sales, excluding the impact of fuel prices, increased 2.7 percent.
Once again, Wal-Mart’s fastest growing division was international where sales surged 22 percent to nearly $24 billion and operating income increased 15.6 percent to slightly more than $1 billion.
Sam’s Club had a solid quarter, but growth in membership income was less than planned. Sales increased 7.6 percent to $11.1 billion and operating income increased 4.3 percent to $386 million.
Looking ahead to the second quarter, chief financial officer Tom Schoewe said Wal-Mart is well positioned in the current economic environment but given the unclear impact government rebate checks will have on sales the forecast for second quarter same store sales is in a range of flat to 2 percent and earnings per share should fall between $0.78 and $0.81.