Inside This Issue - News
Results lift hopes
November 26th, 2012
BENTONVILLE, Ark. – Just a week before Black Friday and the all-important kickoff to the holiday shopping season, Walmart posted third quarter results showing positive sales and earnings numbers, but a slowdown in same-store sales growth. That, in turn, prompted a drop in Walmart’s share price.
By contrast, Target Corp.’s stock got a boost by the release of its third quarter results, which included a 2.9% increase in same-store sales. (Walmart U.S. had a same-store sales gain of 1.5% for the quarter.)
Many analysts expect Target to have an easier time in the fourth quarter, with its core customers less financially constrained.
"That Walmart customer continues to be under pressure, and that pressure will remain," Edward Jones & Co. analyst Brian Yarbrough told Bloomberg news. "Target’s average consumer is higher income and isn’t under as much pressure."
Executives at both companies expressed confidence about their prospects for the holiday shopping season.
"Our fundamentals are strong," said Walmart president and chief executive officer Mike Duke, "and we are well positioned for the fourth quarter, including innovative plans to drive traffic, especially in our U.S. stores. Price will continue to be a major factor for U.S. customers over the holidays. Our strong price position and broad assortment are clear competitive advantages."
Walmart executive vice president and chief financial officer Charles Holley acknowledged that current macroeconomic conditions continue to pressure the retailer’s customers and that the holiday season is expected to be fiercely competitive.
"But we are well prepared to deliver on the value and low prices our customers expect," Holley said.
Target chairman, president and chief executive officer Gregg Steinhafel was also upbeat.
"As we look ahead to the fourth quarter, we feel very good about our ability to delivery inspiring merchandise, most wanted gifts and unbeatable value, while also generating expected profitability," he said.
Target and Walmart were both planning to get an early start on the Christmas season, opening their stores on Thanksgiving evening. Target said it would open its doors at 9 p.m., while Walmart said consumers would be able to visit its stores beginning at 8 p.m.
In the months leading up to the start of the holiday season, meanwhile, both retailers managed to post respectable gains despite a still-difficult economy.
For the third quarter ended October 31, Walmart reported that net sales rose 3.4% to $113.2 billion.
Overall same-store sales excluding fuel edged up 1.7%, including gains of 1.5% for Walmart U.S. and 2.7% for Sam’s Club. With gasoline sales, total comparable-store sales were up 1.9%, reflecting increases of 1.5% at Walmart U.S. and 3.8% at Sam’s Club.
Net sales (including fuel) for the three months ended October 31 rose in all three of Walmart’s operating segments, increasing 3.6% to $66.13 billion at Walmart U.S., 2.4% to $33.16 billion at Walmart International and 4.7% to $13.92 billion at Sam’s Club.
Operating income was up as well across segments, climbing 4.5% to $4.84 billion at Walmart U.S., 4.8% to $1.46 billion at Walmart International and 12.7% to $435 million at Sam’s Club in the third quarter.
For its part, Target said that its net income for the three months ended October 27 was $637 million, or 96 cents per share. (That includes a 15-cent gain from the pending sale of its credit card receivables to TD Bank Group.) Year-ago net earnings were $555 million, or 82 cents per share.
Adjusted earnings per share (EPS) were 90 cents for the 2012 third quarter, compared with 86 cents in the 2011 quarter. On average, analysts had projected EPS of 79 cents for the 2012 third quarter, with estimates ranging from a low of 74 cents to a high of 95 cents, according to Thomson Financial.
On the revenue side, 2012 third quarter retail sales rose 3.4% to $16.60 billion. Target executive vice president and chief financial officer John Mulligan noted that the 2.9% uptick in same-store sales came in the face of tough comparisons with last year’s strong third quarter.
"We are pleased with our third quarter performance and believe we are well positioned to give our guests a superior shopping experience and drive profitable growth in what will certainly be a highly promotional fourth quarter," said Target executive vice president of merchandising Kathee Tesija.