This summary is based on the third quarter fiscal 2009 earnings call conducted by Walmart Stores Inc. (WMT) on November 13, 2008.
Management:
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President and CEO: Lee Scott
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Executive Vice President and Treasurer: Charles Holley–
Wal-Mart Stores US President and CEO: Eduardo Castro-Wright
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Vice Chairman, Wal-Mart International: Mike Duke
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Vice Chairman International: Doug McMillon
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Executive Vice President and Chief Financial Officer: Tom Schoewe
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Vice President, Investor Relations: Carol Schumacher
Key Investors Issues
- Sales were $97.6 billion a 7.5% increase over $90.8 billion in 2007.
- Earnings were $3.1 billion or 77 cents a share, up 9.8% from $2.9 billion or 70 cents a share in 2007.
- The firm repurchased $1.3 billion of its stock.
Year to Date Highlights:
- Sales were up 9% to $296 billion.
- Net income rose 11% to $9.6 billion or $2.40 a share.
- The firm purchased almost 61.5 million shares under the current $15 billion share repurchase authorization.
Third Quarter Highlights
Sales were $97.6 billion a 7.5% increase over $90.8 billion realized over the same period last year as the firm strengthened its price leadership position.
- US comp stores sales were a positive 3% without fuel.
- Operating income was up 6.7% and income from continuing operations before taxes and minority interest increased 7.4%.
- Earnings were $3.1 billion or 77 cents a share, up 9.8% from $2.9 billion or 70 cents a share in 2007 as prior year earnings were impacted positively by 1 cent per share from a gain on the sale of certain real estate properties.
- Discontinued operations includes an after tax gain of $212 million from the sale of Gazeley Limited an ASDA Property Development subsidiary and a $107 million after tax charge related to the closure of 23 stores.
Consolidated gross profit was up 34 basis points primarily due to a strong performance by the Wal-Mart US segment.
- Consolidated inventories were up only 2.2% when compared to October of last year and that’s against a year to date sales increase of 9.4%.
- Payables as a percentage of inventories for the company were 76.2% down 3.2% from last year due to the cut off of the quarter end between this year and last year for some of the larger international operations.
- Consolidated operating expenses as a percentage of sales were up 26 basis points over last year due in part to expenses related to hurricane damage and recovery in the United States as well as an increase in corporate expenses and higher bonus accruals.
Corporate expenses were up 17% due primarily to the investments the company is making in transformation programs.
- The merchandising systems upgrade includes space allocation, pricing tools and other business improvement systems to ensure the firm continues to capture value for its shareholders and to improve the customer experience in stores.
- In finance the firm is involved in a major third party implementation to ensure that systems are strategically integrated and flexible to support growth.
- The HR improvements include upgrades and enhancements to people division infrastructure, management development and scheduling customization.
Net interest expense was down slightly from last year’s third quarter due primarily to lower short term rates.
- The tax rate was 34.9% which is up 38 basis points from this quarter last year as recent fluctuations in foreign currency exchange rates affecting the mix of income between domestic and international operations are the main driver of this increase.
- Debt to total capitalization was 41.8% compared to 42.9% last year.
- The firm repurchased $1.3 billion of its stock which represents approximately 21.4 million shares.
Segment Highlights:
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Wal-Mart US comp store sales increased by a solid 2.7% as total net sales increased by 6.1% to $61.2 billion.
- Across every category in which the firm does business Walmart continues to widen the performance cap between its stores and the competition.
- Operating income for Wal-Mart US are $4.3 billion growing faster than sales and increased 7.3% over the third quarter last year.
- This is despite the negative impact of unusual expenses of $176 million related to hurricanes Gustaf and Ike and also to increased incentive bonus accruals for store associates.
Gross profit as a percent of sales increased by 71 basis points driven by a favorable merchandise mix that reflects the application of the Win/Play/Show merchandising initiative and a significant improvement in inventory levels.
- Traffic was flat for the quarter and average ticket increased to drive the comp.
- Given that many customers are feeling a strain on their budgets and reducing some of their discretionary spending on traffic driving initiatives and value framing campaign were very important in driving performance.
- Performance of seasonal events this past quarter was driven by outstanding store presentation and by the integrated communication program.
- The firm is seeing healthy sales growth on new and innovative products like gaming, flat panel TVs and GPS units.
Inflation in general merchandise is less significant running in the low single digits for both apparel and home.
- Both prescription and over the counter had comp increases during the quarter and new products and initiatives to expand Wal-Mart’s online presence through our 1-800-Contacts venture drove excellent performance in the optical business.
- The firm also announced a very innovative direct to payer model that will cut waste from existing multi-layer drug distribution supply chain system and continue to make healthcare more affordable for American families.
