FINANCE

Wal-Mart profits rise in Q2, U.S. same-store sales flat

BY Katherine Boccaccio

Bentonville, Ark. — Wal-Mart Stores reported Tuesday that profit for the quarter ended July 31 rose to $3.8 billion, up from $3.6 billion in the year-ago period. Overall revenue, up 5.4% to $109.37 billion, topped Wall Street’s expectations.

Yet, the world’s largest retailer is feeling the pinch from a tight economy that is slow to loosen. Wal-Mart U.S., the company’s biggest unit, posted a 0.9% drop in same-store sales, the ninth consecutive quarterly drop and beneath analysts’ estimates for a 0.6% fall.

"We remain concerned about the economic pressure on our customers and the uncertain impact it can have on their shopping behavior," Wal-Mart U.S. CEO Bill Simon said.

U.S. sales rose 1.8% for the quarter. On the international front, the company remains strong, as sales on a constant currency basis were up 7.1% for the second quarter. Mexico, the United Kingdom, Canada, Brazil and China had the largest sales increases during the quarter.

Wal-Mart continues to ride the success of Sam’s Club, as sales for the warehouse club operator rose 5% on a same-store basis.

During the quarter, Wal-Mart Stores opened its first small-concept stores in the United States — Wal-Mart Express — and acquired a majority stake in South African retail chain Massmart. The company is also in the throes of overhauling its online business in an effort to improve the e-commerce facet of its business.

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TJX comps up in Q2

BY CSA STAFF

FRAMINGHAM, Mass. — TJX announced that net sales for the second quarter of fiscal 2012 increased 8% to $5.5 billion and consolidated comparable-store sales increased 4%. Net income for the second quarter was $348 million and diluted earnings per share were 90 cents, compared with 74 cents per share last year.

For the first half of fiscal 2012, net sales were $10.7 billion, a 6% increase over last year, and consolidated comparable-store sales increased 3% over the prior year. Net income was $614 million, and diluted earnings per share were $1.57 compared with $1.54 in the same period last year.

Carol Meyrowitz, CEO of TJX, stated, “I am very pleased with our strong second quarter performance as our 23% increase in adjusted earnings per share exceeded the high end of our already raised expectations. Further, these results mark the sixth consecutive year of very strong second quarter operating performance. We believe that this speaks to the consistency of TJX and the great flexibility of our business model, which has enabled us to succeed year after year, through both strong and weak economic environments. Customer traffic continues to be up over large increases in the last two years, as our tremendous values attract new and loyal customers. As we enter the third quarter, we see a marketplace full of fabulous brands and fashions and we will be utilizing the flexibility in our inventory position to take advantage of these opportunities. In addition, we will be significantly increasing our marketing penetration in the second half of the year, leveraging our marketing spend, which we believe will also draw consumers to our stores. We are confident in our prospects for the second half of 2011 and our ability to drive sales and profits in the short and long term, through various economic and retail cycles.”

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Walmart says strategy working, reaffirms commitment to EDLP

BY CSA STAFF

BENTONVILLE, Ark. — Despite the absence of top line growth at Walmart’s U.S. stores division, second quarter earnings grew 12.4% to $1.09 and came in a penny ahead of analysts’ estimates, which was enough for the company to narrow and increase the range of its full year profit forecast.

Full year earnings per share are now expected to fall within the range of $4.41 to $4.51, which is a tighter window and a penny higher than the guidance of $4.35 to $4.50 provided back in February when fourth quarter results were released. Total company sales for the second quarter increased 5.5% to $108.6 billion, aided by a $2.3 billion currency exchanged benefit, and profits increased 5.7% to $3.8 billion.

The company’s profit performance is noteworthy given the ongoing difficulties with the U.S. stores division where a 0.9% same-store sales decline was the ninth consecutive quarter of negative comp growth and came on top of a prior year decline of 1.8%.

Wal-Mart Stores president and CEO Mike Duke said he was encouraged by the sales improvement in the United States, which increased sequentially each month within the quarter.

“In fact, this was the best quarterly performance since the third quarter of fiscal 2010,” Duke said. “We’re committed to delivering positive comp sales by widening the gap on price, and we have a specific plan to deliver EDLP to every customer.”

Also sounding an optimistic tone was Walmart U.S. president and CEO Bill Simon who said he was encouraged by sales momentum from the second quarter.

“Our grocery and health and wellness business, representing two-thirds of our sales continued to deliver positive comps,” Simon said. “Our hardlines and apparel businesses are improving.”

Sales at the stores division increased 0.4% to nearly $64.9 billion, while operating profits grew 2.1% to nearly $5 billion, and Simon indicated that based on the start of August sales he was confident the company’s plans are working and will produce ongoing sales improvement.

However, expectations for same-store sales in the third quarter continue to envision a potential decline with the range of possibilities extending from a 1% decline to a 1% increase. Simon noted that this year’s third quarter ends on Oct. 28 and therefore could be negatively affected by last minute Halloween sales, which would fall in the fourth quarter.

Comps are expected to turn positive by the fourth quarter according to Simon and other executives at the company who contend the emphasis on every day low prices on a broad assortment of merchandise will continue to gain traction.

“As you have heard from us before, we know that strengthening price leadership starts with being the low-cost provider,” said Wal-Mart Stores, Inc. CFO Charles Holley. “As we continue to lower our costs, we will also be investing in price, helping our customers save money so they can live better. We will be relentless in widening the pricegap, as Mike (Duke) says, to pass savings along to our customers around the world. We believe that EDLP will lead to top line growth as customer traffic improves.”

Walmart ended the second quarter with a total of 9,230 units worldwide, including 4,427 stores in the United States. The company now operates 2,933 supercenters and the number of discount stores has dwindled to 692 units as they continue to be converted to supercenters. There were 609 Sam’s Club, 183 Neighborhood Markets and 10 small format stores at the end of the second quarter.

A little more than half of Walmart’s store base, or 4,803 units, are now located outside of the U.S. in the following markets: Mexico (1,789), United Kingdom (536) Brazil (484), Japan (413), China (338), Canada (325), Chile (290), Costa Rica (183), Guatemala (177), El Salvador (78), Argentina (64), Nicaragua (62), Honduras (58) and India (6).

The international division grew sales by 16.2% to $30 billion and operating profits increased 8.9% to $1.4 billion.

The strongest performance was turned in by Walmart’s small division. Sam’s Club same-store sales increased 5%, at the high end of the company’s guidance range and marked the sixth consecutive quarter of sequential improvement. Sam’s total sales increased 9.5% to $13.6 billion and operating profits increased 15% to $492 million. Sam’s Club president and CEO Brian Cornell said he expects third quarter comps to increase between 3% and 5%.

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