Wal-Mart US comps in surprise Q3 revival ahead of all-out Holiday discount price war

After an almost two-year lapse Wal-Mart Thursday reported a surprise rise in domestic same-store sales while the world’s biggest retailer also lodged Q3 earnings that beat analysts’ expectations. Its shares rose 3.2% to $81.73 in afternoon trading. First the big news: Same-store sales in the US rose 0.5% as total sales rose 2.9% to $119bn, albeit helped by a strong performance in at its smaller format Neighborhood Market stores where comps jumped 5.5%. Analysts had expected $118.3bn in sales.

Wal-Mart credited lower fuel prices for freeing up cash for its core customer, boosting sales.

Although net profit fell 0.4% to $3.71bn/$1.15 per share for the quarter, that came in ahead of analysts’ view for $1.12 per share.

Now the not-so-good news: There was a 0.7% dip in overall footfall for the quarter, marking two full years of traffic declines at its US stores. Wal-Mart also issued a Q4 profit outlook that missed analysts’ expectations ahead of what is expected to be a Holiday of severe discounting battles.
But Wal-Mart is going all-out to win its share of the Holiday dollar, announced an aggressive plan that includes free shipping on the top 100 items and price cuts on 20,000 items. Starting Friday, Wal-Mart will start to match its online prices with Amazon.

“Being the price leader is an ongoing priority for us and a commitment to our business,” said Doug McMillon, who took over as CEO in February. “And with every year, that is even more important during the Holiday season.”

He added that while he’s encouraged by the sales increase at its Wal-Mart stores, he’s still not satisfied with the performance.

“We need to continue to improve the customer experience, both in our stores and online, to deliver stronger sales growth and strength our bottom line performance,” McMillon said.
Elsewhere, Wal-Mart International sales, including fuel sales, increased 1.7% year-on-year, or up 2.9% on a constant currency neutral to $33.7bn on accelerated growth in e-commerce, including the launch of new expanded assortments and services in Mexico and China. Currency fluctuations impacted international sales by $396m in the quarter. Operating income increased 3.7% to $1.43bn.

Sam’s Club, meanwhile, posted net sales, including fuel, up 2.3% to $14.39bn. Excluding fuel, sales increased 2.3% to $12.7bn. Comps, excluding fuel, increased 0.4%, in-line with expectations, versus an increase of 1.1% in the prior-year quarter. Sam’s Club comp traffic was up 0.2%, while average ticket increased 0.2%. E commerce sales positively impacted comp sales by around 0.2% in the quarter.

Wal-Mart said that it expects Q4 earnings to range $1.46-$1.56, which includes the negative impact of shuttering underperforming stores in Japan. Analysts had expected $1.57 per share. The company also expects full-year earnings $4.92-$5.02 per share. Analysts had expected $4.99.

Wal-Mart’s UK arm Adsa has attacked its domestic rivals, accusing them of adopting desperate measures. It said the increasing use of vouchers and promotions by rivals were cheap gimmicks that misled shoppers. Asda’s underlying sales dropped 1.6%in Q3 to end-September, compared with growth of 0.5% in Q2. The drop is attributed to a “distressed market for all major retailers,” during which discounters continued to win out. Asda had not seen a fall in sales since 2010.

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