This summary is based on the second quarter fiscal 2008 earnings call conducted by Wal-Mart Stores, Inc. (WMT) on 14th August, 2007.
President and Chief Executive Officer: Lee Scott
EVP and Chief Financial Officer: Thomas Schoewe
Senior Vice President, Finance: Charles Holley
EVP and President and CEO, Wal-Mart Stores Division: Eduardo Castro-Wright
IR: Carol Schumacher
Key Investors Issues
- Earnings for the quarter were $3.11 billion, or 76 cents a share, compared with a profit of $2.08 billion, or 50 cents a share a year ago.
- Total revenue climbed 8.9%, reaching $93.01 billion.
- Quarterly sales at the Wal-Mart and Sam''s Club stores, plus international receipts, rang up net sales of $91.99 billion, 8.8% higher over last year.
- Membership and other income rose 12.8% to $1.02 billion.
- Same-store sales were up 1.9% in the U.S., excluding volatile fuel sales.
Third Quarter Fiscal 2008 Outlook
- The company expects a same-store sales increase for its US operations of between 1% and 3%.
- Earnings per share from continuing operations for the third quarter are expected to come in between 62 and 65 cents per share.
Full Year Outlook
At the beginning of the fiscal year, the company’s guidance for the year was $3.15 to $3.23 a share. Wal-Mart’s current forecast for fiscal 2008 is $3.05 per share to $3.13 per share. This revision reflects the company’s need to improve underlying operating performance coupled with the macro economic pressure felt feel in many of the company’s major markets including the United States, Mexico and Canada.
Second Quarter Highlights
The comp store sales for total US operation and for SAM’s CLUB segment exclude the impact of fuel sales at SAM’s CLUB segment. That measure, the return on investment and cash flow coverage ratio may be considered non-GAAP financial measures.
The company has increased the amount of rollbacks more than 20% this year in its US stores.
Wal-Mart has also continued to strengthen its product offering with more name brands. At SAM’S CLUB, there is an ongoing improvement in serving the small business owner. SAM’S once again grew profits faster than sales.
Total net sales for the company were up 8.8% from a year ago.
US same-store sales were 1.9% in the second quarter. That’s above the 0.6% reported in the first quarter of this fiscal year and above the 1.7% reported last year in the second quarter.
Income from continuing operations increased 4.1% from a year ago.
Earnings per share from continuing operations were 76 cents per share for the second quarter.
Earnings per share from continuing operations for the second quarter were impacted by three items, providing a net benefit of $171 million after tax, or 4 cents per share. These included:
- accruals for general liability and workers compensation claims were reduced by $196 million after tax;
- recognition of $41 million in after-tax gains from the sale of certain real estate properties;
- charges of $66 million after tax for legal and other contingencies.
Consolidated gross margin was down 33 basis points for the second quarter, primarily due to the Wal-Mart US segment.
Price leadership initiatives, markdowns, inventory shrinkage and product mix all contributed to the reduction in gross margin.
The consolidated operating expense percentage as a percentage of net sales for the quarter was essentially flat with the same period last year.
- Only SAM’S CLUB actually leveraged expenses.
Other income continues to increase, up 12.8% from a year ago.
- In addition to SAM’S CLUB membership, other income categories include tenant leases, recycling income and financial services.
- Other income as a percentage of sales for Wal-Mart US operating segment increased by 6 basis points when compared to the same quarter in the prior year. This reflects increased recycling income and the benefits of financial services.
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