This is a summary of the third quarter fiscal 2008 earnings call conducted by Wal-Mart Stores, Inc. (WMT) on November 13, 2007.
Management:
President, CEO, Director: Lee Scott
EVP and CFO: Thomas Schoewe
VP, Investor Relations: Carol Schumacher
EVP, President and CEO, Wal-Mart Stores Division: Eduardo Castro-Wright
EVP, President, and CEO SAM’S CLUB: Doug McMillon
SVP, Finance: Charles Holley
Key Investor Issues:
- The company earned 70 cents per share, up from 62 cents a year ago. The 70 cents includes an after-tax gain equal to 1 cent per share.
- In the most recent quarter Wal-Mart had revenue of $91.95 billion, up 8.8% from $84.47 billion reported a year ago.
- Same-store sales, not counting fuel, were up 1.5% in the U.S. stores, unchanged from a year ago.
Fourth Quarter Guidance
For the fourth quarter Wal-Mart expects US comps to be between flat and a 2% increase. The company expects earnings per share from continuing operations for the fourth quarter to be between 99 cents and $1.03 per share resulting in a full year forecast for earnings per share from continuing operations of $3.13 to $3.17 per share. This guidance includes an anticipated restructuring charge for Seiyu of approximately $40 million after tax in the fourth quarter.
Third Quarter Financial Highlights:
- Both Wal-Mart stores US and SAMS CLUB’S increased profits faster than sales.
- Wal-Mart International posted a solid quarter as well.
Earnings per share from continuing operations for the quarter were 70 cents per share, up from 62 cents per share for last year’s third quarter. A lot of the credit for these results goes to the Wal-Mart US stores, who had improvements in inventory and expense control. Net sales for the third quarter of fiscal 2008 were almost $91 billion, that’s an increase of 8.8% over the third quarter of the last fiscal year.
According to the plans for the fourth quarter of Wal-Mart Stores Incorporated, the company expects to do at least $100 billion.
The company’s first $100 billion quarter is a record for Wal-Mart. What drives that is the Wal-Mart low cost, low price model.
Wal-Mart US continues to have three very strong businesses: Grocery, Health and Wellness and Entertainment.
- In hard lines business, seasonal categories like Halloween showed continued strength.
- Halloween sales did very well in every department. The company sees improving trends in both home and apparel.
Operating income for Wal-Mart US was up 11.1% on a sales increase of 6.4%.
- The team made significant improvement on inventory and surpassed the goal of growing inventory at half the rate of sales.
- SAM’S CLUB continues to drive increased traffic and tickets as well as growing profits faster than sales.
Internationally the company will continue to invest in markets that will deliver both long term growth and solid returns.
The management believes that full ownership of Seiyu will provide the flexibility and the freedom to operate that company most effectively and profitably. And, in a fragmented market, the management believes that Japan continues to hold much opportunity.
This next week, Wal-Mart will be celebrating the opening of our 3,000th store outside of the United States.
Total net sales for the company were up 8.8% from a year ago.
- US same-store sales were up 1.5% in the third quarter. That’s inside the guidance provided at the beginning of the quarter.
- Earnings per share from continuing operations were 70 cents per share, up from 62 cents per share reported in the third quarter last year.
- Earnings per share were impacted positively by 1 cent per share from a $46.5 million after tax gain on the sale of certain real estate properties.
During the third quarter operating income increased 11.4% on a sales increase of 8.8%.
Gross margin improvement and tight expense control contributed to this improvement. Consolidated gross margin was 23.75%, or up eight basis points from the third quarter last year. As a percentage of sales, consolidated operating expenses for the third quarter were essentially flat to last year.
