This summary is based on the first quarter fiscal 2009 earnings call conducted by Wal-Mart Inc. (WMT) on May 13, 2008.
President and CEO: Lee Scott
Executive Vice President and Chief Financial Officer: Tom Schoewe
Wal-Mart Stores US President and CEO: Eduardo Castro-Wright
Vice Chairman, Wal-Mart International: Mike Duke
Executive Vice President and Treasurer: Charles Holley
Vice President, Investor Relations: Carol Schumacher
Key Investors Issues
- Earnings per share were 76 cents, up from 68 cents in the first quarter of last year.
- Quarterly revenue grew 10.2% over last year to $94.1 billion.
- The firm expects earnings per share for Q2 to be between 78 cents and 81 cents.
First Quarter Fiscal 2009 Financial Highlights
Total net sales for the company were $94.1 billion, up 10.2% from last year.
In addition, US same store sales were 2.9% and that is without fuel in the first quarter. That is above the range of flat to 2% that the firm had forecasted for the quarter. More important, the 2.9% same store sales for this quarter is the strongest quarterly comparable store sales performance for the US business in eight quarters.
Operating income was up 9.5%, with income before taxes and minority interest for the first quarter increasing 8%.
Net income rose about 7% from the prior year. Diluted earnings per share were 76 cents, up from 68 cents per share in the first quarter of last year. The company had two items booked last year that influenced the year to year comparisons:
- The Wal-Mart Stores and Sam''s Club segments operating income included the favorable impact of an excise tax refund on prior phone card sales, $46 million for Wal-Mart and $39 million for Sam''s.
- The firm recorded a charge of approximately $73 million for Wal-Mart and $10 million for Sam''s because of accruals for legal and other contingencies.
Consolidated gross margin was up 11 basis points for the first quarter due primarily to the stronger performance of the Wal-Mart US business.
Higher transportation costs will remain a potential headwind for the rest of the year.
Consolidated inventories were up only 1% against a year to date sales increase of 10.2%.
- Payables as a percentage of inventories for the company were 81.7% at the end of the first quarter, which is up from the 78.3% we reported last year.
- Other income was up 15.4% for the first quarter over last year. The other income includes Sam''s Club membership revenue, tenant lease income, financial services, recycling income, and the gain on certain real estate transactions. Financial services had another strong performance.
Consolidated operating expenses, as a percentage of sales, were up approximately 21 basis points over last year.
This was due to higher utility costs, coupled with higher repairs and maintenance. Corporate expenses were up approximately 20% from the first quarter of fiscal 2008, due primarily to investment in ""transformation programs"". During the fourth quarter call, the management had explained its long term transformation projects to enhance the information systems for merchandising, finance, and human resources. These will continue to be a headwind for the rest of this fiscal year and for several years to come. Without the transformation projects, the corporate operating area would be up by only 3%.
- Interest expense was up 27% over last year''s first quarter due to higher debt levels resulting from increased share repurchase activity during the past few quarters.
- The tax rate for the quarter was 34.7%. The firm expects the tax rate for fiscal 2009 to be between 34% and 35%, although it will see some quarterly fluctuation. Factors which may affect the rate include changes in assessment of certain tax contingencies and the mix of international to domestic income.
Debt to total capitalization was 43.2% at the end of the first quarter of this fiscal year, above the 41.3% rate at the same time last year.
The cash flow from operations to average debt was approximately 40%. The firm reported continued progress with its capital efficiency model. The firm’s cash flow statement reflects payments for capital spending or CapEx, of approximately $2.4 billion during the first quarter. This represents a decrease of approximately 22% from last year. The forecast for capital spending for fiscal 2009 continues to be between $13.5 billion and $15.2 billion.
ROI from continuing operations for the trailing 12 months ended April 30, 2008 is 19% and compares to 19.5% in the same period last year.
Some portion of this decline resulted from the increase in cash balances at the quarter end. Subsequent to the quarter end much of that debt was paid down.
