Walmart Q3 Earnings Per Share Beat Guidance

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Q3 EPS of $0.84 Exceeds First Call Consensus of $0.81

BENTONVILLE, Ark., Nov. 12 -- Wal-Mart Stores, Inc. (NYSE: WMT) today reported diluted earnings per share from continuing operations for the third quarter of fiscal year 2010 of $0.84, exceeding the company's guidance of $0.78 to $0.82. Walmart earned $0.77 per share from continuing operations in the third quarter last year.

Net sales for the third quarter were $98.667 billion, an increase of 1.1 percent from $97.619 billion in the third quarter last year. On a constant currency basis (which assumes currency exchange rates remained the same as the prior year), net sales for the third quarter would have been $2.617 billion higher, increasing 3.8 percent to approximately $101.284 billion. Income from continuing operations increased to $3.246 billion from $3.033 billion in the same period last year, on a reported basis.

"Walmart's record third quarter earnings of 84 cents per share exceeded our guidance and were well above First Call consensus," said Mike Duke, Walmart president and chief executive officer. "Increased productivity and improved inventory management led to a better customer experience and contributed to our strong financial performance.

"The sales environment continued to be difficult this quarter, but customer traffic is up throughout the company. We gained market share, especially in the United States, the United Kingdom and Mexico, as customers around the globe continued to count on Walmart for quality and low prices," Duke said. "During the recession of the last two years, we delivered year-over-year sales and EPS growth on a constant currency basis.

"We are encouraged by both our traffic and market share gains across the company," he added. "Few companies have the momentum or opportunity that Walmart has around the world."

The company continues to generate strong free cash flow - nearly $3.6 billion through the first three quarters of fiscal year 2010. A reconciliation of free cash flow (a non-GAAP measure) to net cash provided by operating activities is included at the end of this release.

Reported International sales for the three months ended Oct. 31, 2009 were reduced by $2.617 billion as a result of the effect of currency exchange rates. On a constant currency basis, International sales increased 12.1 percent to $27.924 billion in the third quarter, compared to the same quarter last year.

Reported International operating income for the three months ended Oct. 31, 2009 was reduced by $172 million because of the effect of currency exchange rates. On a constant currency basis, International operating income increased 9.2 percent to $1.291 billion in the third quarter, compared to the prior year's third quarter.

Operating Segments Review

During the third quarter, Walmart U.S. delivered very strong operating performance, fueled by productivity initiatives and efficient inventory management. Operating income increased 6.9 percent on a sales increase of 1.2 percent. Comparable store sales were below expectations, but continued increases in customer traffic and market share gains, especially in grocery and health and wellness, underscore the strength of the underlying business.

Walmart U.S. expects comparable store sales during the 13-week period from Sat., Oct. 31, 2009 through Fri., Jan. 29, 2010 to be flat, plus or minus one percent - as compared to the 2.4 percent comp for the same period last year. The company will report this comparable store sales result when it reports fourth quarter earnings on Feb. 18, 2010.

During the third quarter, Sam's Club upgraded and added memberships, driven by its eValues program. Gross margin increased from improved margin mix. Sam's also improved operating profits and expense management. Comparable club sales were within its guidance, due to strong performance in food, consumables and health and beauty aids.

Sam's Club expects comparable club sales during the fourth quarter 13-week period to be approximately flat, plus or minus one percent, and also will report its comparable club sales result on Feb. 18, 2010.

International remains Walmart's fastest-growing segment, with strong sales performances in the United Kingdom, Mexico and Brazil. Including the Chilean acquisition, sales increased 12.1 percent and operating income increased 9.2 percent, both on a constant currency basis. Price leadership and strong underlying operating performance continue to drive market share gains in every major market.

Earnings Guidance

"We continue to operate in a very challenging economy and remain dedicated to provide the lowest prices to our customers around the world," said Tom Schoewe, Walmart executive vice president and chief financial officer. "We believe Walmart is positioned better than any other retailer to succeed with customers this holiday season.

"Based on our view of the business, we expect diluted earnings per share from continuing operations for the fourth quarter of fiscal year 2010 to be between $1.08 and $1.12," Schoewe said. "As a result, we are raising the range of our guidance for diluted earnings per share from continuing operations for the full fiscal year to $3.57 to $3.61, from $3.50 to $3.60."

Source: Wal-Mart Stores, Inc. (NYSE: WMT)