Wal-Mart Beats But Narrows

Wal-Mart Stores Inc. (WMT) reported strong second quarter results with earnings of 88 cents per share, which exceeded the Zacks Consensus Estimate of 85 cents. Earnings were up 2.3% year-over-year and were at the high-end of management’s guidance of 83 cents to 88 cents per share.

Wal-Mart’s revenue for the quarter declined 1.4% year-over-year to $101.5 billion, as marginal revenue increases in the Wal-Mart’s U.S. segment of 0.3% was fully offset by declines in International and Sam’s Club segments of 5.1% and 3.2%, respectively. International sales were primarily affected by the recent currency volatility.

U.S. comparable store sales for Wal-Mart and Sam’s Club declined 1.2% year over-year, below management’s guidance of flat to positive 3%.

Off late, the departmental stores are facing the brunt of the recession, and are witnessing declining revenues, as consumers with less disposable income focus more on basic items such as food. Furthermore, rising unemployment is also taking its toll on consumers’ spending abilities.

For the first six months of fiscal 2010, the company generated a strong cash flow of $4.2 billion primarily due to efficient working capital management.

Wal-Mart delivered a strong performance for the first half of 2009 despite challenges from price deflation, the effects of the recession and currency exchange rates. Therefore, annual earnings are now expected to come in at $3.50 to $3.60 per share. Previous expectation was $3.45 to $3.60 per share.

For the third quarter of fiscal 2010, earnings are expected to be in the range of 78 cents to 82 cents, including a three-cent negative impact from currency.

Comparable same-store sales for the third quarter are expected to be flat to up 2%. Sam’s Club comparable store sales during the same period are forecasted to be flat, +/- 1%.

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