Sales down, profits up at Wal-Mart

Sales down, profits up at Wal-Mart

Sales at Wal-Mart declined 0.6% to $93.5 billion during the first quarter, as currency exchange rates negatively affected international growth, while strength at the U.S. stores division enabled the company to achieve earnings per share at the high end of its guidance.

Total U.S. sales increased 3.8% to $61.2 billion primarily due to a 3.6% same-store sales increase. Operating income grew at a slightly slower pace, advancing 3.3% to approximately $4.5 billion. International sales declined 11.1% to $21.3 billion and operating income declined 16.2% to $880 million. However, if sales and profits are calculated on exchange rates in effect during the prior year first quarter sales would have increased 9.1% and profits grew7.8%. Exchange rates were not a factor at Sam’s Club where sales declined 1.4% to $10.9 billion although same-store sales including fuel increased 4.2%. Overall sales were also negatively affected by the loss of one selling day since 2008 was a leap year.

Despite a challenging sales environment, president and CEO Mike Duke said a per share profit of 77 cents, a penny higher than the prior year period, was a very good start to the year in light of a very challenging global economy. The company’s guidance at the beginning of the quarter was for earning per share in a range of 72 cents to 77 cents.

“When economic conditions improve, we believe customers who shop Wal-Mart today will stay with us, because of the business improvements we’re making and continue to make,” said Wal-Mart president and CEO Mike Duke. “Across the company, we are building our brand by reducing costs, sharpening our merchandising and updating our stores. Customers trust Wal-Mart. As a result of the increasing shift to value, they have long term loyalty to the Wal-Mart brand because we save them money.”

Looking ahead to the second quarter, CFO Tom Schoewe said the company expects earnings per share to be in a range of 83 cents to 88 cents. Earnings per share in the second quarter of last year were 86 cents.

“Our guidance takes into account Wal-Marts’ strong underlying performance and the difficult economic environment. Plus, our U.S. businesses will be up against the economic stimulus checks in the second quarter last year.”