Wal-Mart beats Q1 estimates, but US sales sluggish
Wal-Mart (NYSE:WMT) reported Tuesday a 3% increase in net income as international sales rose, but U.S. locations continued to struggle, prompting a decrease in the retail giant's share price.
For the first quarter ending April 29, the Bentonville, Arkansas-based company posted net income of $3.4 billion, or 97 cents per share, compared to year-ago profits of $3.3 billion, or 87 cents per share.
Income from continuing operations were 98 cents per share, benefiting from a one cent impact due to currency translation effects, Wal-Mart said.
The results were above Wall Street predictions for the quarter, which expected earnings of 95 cents per share.
Much of the increase in profits was attributed to strength in international store sales, which increased 11.5%, or 6.2% in constant currencies.
Sales from locations in Mexico, Chile, and China had the highest sales percentage increase since last year, the company said. Japan, however, did not post a strong increase like its international Wal-Mart counterparts, largely due to the devastating March earthquake and tsunami.
Despite the hike in net income and international net sales, comparable stores in the US, the company's largest market, posted a 1.1% decrease in revenue. Wal-Mart has posted a loss in US same store sales for the past eight quarters, although with slight improvement, as US comparable stores in the year-ago period posted a wider loss of 1.4%.
Wal-Mart said the unstable economic environment and higher gas and grocery prices are a major factor in the decline. The hike in prices has led to lower traffic in stores, as Wal-Mart's main consumer base is lower-income families.
The company's estimates for US same store sales in the second quarter were on the cautious side, between a 1% gain and a 1% loss.
"We are monitoring the economic environment carefully, as significant changes in gas prices and inflation during the quarter will influence our actual performance," said president and CEO of Wal-Mart U.S., Bill Simon.
Still, total revenue rose 4.4% to $104.2 billion, beating the $102.93 billion analyst estimate. US net sales went up slightly by 0.6%, alongside the strong boost to international revenue.
Wal-Mart's warehouse retail chain, Sam's Club, saw a 9.4% increase in revenue, to $12.8 billion. Comparable sales for these stores rose 4.2%, excluding fuel.
Looking ahead, the company said that second quarter earnings from continuing operations are expected to range between $1.05 to $1.10 per share, in line with Street estimates.
Wal-Mart's shares on the New York Stock exchange dropped 0.57% at the news of the company's sluggish U.S. store sales. As of Tuesday morning, its stock was trading at $55.74 per share.
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