Wal-Mart Stores’ first-quarter net income inches slightly

Revenues decline by 1 per cent.

New Statesman
Photograph: Getty Images.

US-based Wal-Mart Stores’s profits edged up slightly by 1.3 per cent to $3.94bn in the first-quarter ended 30 April 2013, compared to $3.89bn for the same period last year, as the world’s largest supermarket chain struggled with sales slump in the US business.

During the quarter, total revenue and net sales declined by 1 per cent to $114.18bn and $113.42bn respectively. Operating income fell by 1.1 per cent to $6.45bn (2012: $6.38bn).

Diluted earnings per share increased by 4.6 per cent to $1.14 (2012: $1.09).

Mike Duke, president and CEO of Wal-Mart Stores, said: “In a quarter marked by considerable headwinds to top line sales, Walmart delivered solid EPS growth of 4.6 percent.”

Segment wise, Walmart U.S. operating income grew by 5.9 per cent to $5.32bn (2012: $5.03bn), while Walmart International’s operating income fell by 4.7 per cent to $1.25bn (2012: $1.31bn) due to impact of currency fluctuations.

Charles Holley, CFO of the company, said the company faced a very tough sales environment, particularly in the US.

Sam’s Club division (excluding fuel) posted an operating income of $0.51bn during the quarter, an increase of 6.6 per cent compared to $0.48bn a year ago.

During the 13-week period ended 26 April 2013, the Walmart U.S. comp was negatively impacted by a delay in tax refund checks, challenging weather conditions, lower grocery inflation than expected and increase in  payroll tax.  “Comp sales for the first quarter were impacted by unfavorable weather and less than expected inflation,” said Rosalind Brewer, president and CEO of Sam’s Club.

During the quarter, the company returned $3.8bn to shareholders through dividends and share repurchases and reported free cash flow of $1.9bn.

Walmart’s corporate expenses also saw significant increase of 37 per cent, partially due to $73m of costs related to bribery charges levelled in Mexico; the company had predicted that the costs would be anywhere between $40m and $45m during the quarter.

The company also acknowledged that it could not control its overseas expenses; however, it  said that measures would be taken to improve management of costs.

Meanwhile, the supermarket chain plans to make huge investments in online business, where sales surged by over 30 per cent;  the company expects its annual online sales to touch $9bn.

Wal-Mart Stores’ UK subsidiary Asda sales and profits grew by 1.3 per cent during the quarter, primarily due to a series of price promotions. However, market share of Asda was unchanged at 17.9 per cent.

Andy Clarke, CEO of Asda, said: “This represents a strong performance in what remains a very tough market. Despite a difficult environment for our customers, we have continued to achieve growth.”

Colin McGranahan, analyst at AllianceBernstein, told the Financial Times: “While expectations were muted, overall first-quarter results were lacklustre and missed expectations on multiple fronts.”