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Walmart Q1 EPS beats guidance, but U.S. comps still a sore spot

BY DSN STAFF

BENTONVILLE, Ark. — Walmart reported first-quarter earnings that were above the company’s guidance, reflecting stability and strength in global operations, according to company president and CEO Mike Duke.

Walmart’s net income was $3.4 billion, or 98 cents per diluted share, compared with net income of $3.3 billion, or 87 cents per diluted share.

Walmart reported net sales for the first quarter of $103.4 billion, an increase of 4.4% from $99.1 billion in the first quarter last year. Net sales for the quarter included a currency exchange rate benefit of $1.3 billion.

Achieving positive same-store sales remains a challenge at Walmart U.S., as this division reported a 1.1% decline due to a decrease in traffic. Though this was within the company’s guidance range, Duke said there is room for improvement.

"We recognize we still have work to do, and comp sales growth remains the greatest priority for me and the entire Walmart U.S. team. The good news is that the plan Bill Simon and his team are executing is gaining traction. We’re focused on delivering everyday low prices and a wide assortment," Duke said.

The company said it expects U.S. same-store sales for the second quarter to range from -1% to 1%.

Walmart had more success with its Sam’s Club division, which reported that comparable sales, without fuel, increased 4.2% for the same period, which was 120 basis points above guidance. The company is expecting Sam’s Club’s comp sales, without fuel, for the second quarter to increase between 3% and 5%.

"Our second quarter is under way, and we expect our strong sales momentum to continue across grocery, home and apparel," said Brian Cornell, Sam’s Club president and CEO.

At Walmart’s international operations, net sales were up 11.5% to almost $28 billion, with all countries except Japan showing sales increases. According to the company, the March 11 earthquake and tsunami negatively affected sales in Japan.

"International remains the key growth driver for our company, and the segment is seeing continued growth through a combination of comp sales and new stores," Duke said. "Mexico, China and Chile had the highest percentage sales increases for the first quarter, compared with last year."

For the second quarter, Walmart is expecting to diluted earnings per share to be in the range of $1.05 and $1.10, compared with last year’s reported EPS of 97 cents. The company also expects to see continued growth in e-commerce.

"The recent acquisition of Kosmix is now integrated into @Walmartlabs in Silicon Valley and allows us to expand our capabilities in the online social commerce environment," Duke said. "[Last week], we announced that we are acquiring a minority stake in Yihaodian, one of the leading online retailers in China. We expect ongoing activity in the e-commerce area around the world."

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Pharmaca teams up with Own, GoodGuide to extend sun care campaign

BY Michael Johnsen

BOULDER, Colo. — Pharmaca Integrative Pharmacy on Tuesday announced a new partnership with Own bio-activating skin care and GoodGuide.

Launching May 16, the Safe Sun campaign will use social media to help educate consumers and answer questions about best practices in sun care on the Facebook pages of Pharmaca, GoodGuide and Own.

The page will be dedicated to education about sun care, including informational videos exclusively made for the campaign, articles by GoodGuide and Own experts, quizzes and more. The Facebook pages also will include daily sun care tips and information, and participants will be entered to win daily, weekly and grand prize drawings.

This type of education is more important than ever to help clear up confusion over sun care, Pharmaca stated. The uncertainty comes over such ingredients as oxybenzone — a common factor in sunscreen — being listed among Time magazine’s Top 10 common household toxins last year, or even recent data from the Food and Drug Administration that showed that retinyl palmitate, also found in some sun care products, can accelerate the development of skin cancer instead of prevent it. People want to know which types of sunscreen are best, how often to use it and whether their favorite sunscreens are safe.

“We’re looking forward to demystifying this issue by leveraging the experts at GoodGuide and Own,” stated Laura Coblentz, Pharmaca’s VP marketing and innovation. “This partnership is a great complement to our mission of offering the safest, most effective products alongside a wealth of health information that allows our customers to choose the best product for them.”

Only Facebook fans of Pharmaca, GoodGuide or Own will have access to the educational events and materials. By participating in the campaign, fans will be eligible on a daily basis to win Own Sun Care products, as well as the grand prize that will be announced on June 30 — a $250 gift card valid at any Pharmaca retail location.

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Winn-Dixie CEO confident in outlook

BY Michael Johnsen

JACKSONVILLE, Fla. — Winn-Dixie president, chairman and CEO Peter Lynch expressed confidence in the grocer as it heads into its fourth quarter, maintaining that the grocer’s estimated adjusted EBITDA will come in at the lower end of the $100 million to $130 million range for fiscal 2011, a 52-week period ending June 29, in light of relatively flat third-quarter results.

So far, the fourth quarter is looking especially positive, Lynch said. “[Identical-store] sales are low single-digit, and the performance is strong,” he told analysts Tuesday morning.

Rising gas prices may prove to be a double-edged sword for the Southeastern supermarket, however, especially if high fuel costs impact Florida’s tourism industry coming into the peak season of June through August. “What we’re seeing in tourism in Florida is a lift of about 5% versus last year,” Lynch said. That lift looks sustainable, Lynch added, as Florida tourism has been up over the two most recent quarters and personal income of Floridians is up some 3.4%. “We’re starting to see good signs.”

But any deviation from that growth could have a significant impact on Florida residents, as tourism is a significant factor in the health of the state’s economy. “The economy in Florida still lags behind the rest of the country with unemployment higher than the national average [11.1% vs. 9%],” Lynch said.

Winn-Dixie’s recently launched Fuelperks! program, where members can achieve savings of between 50 cents and $1 per gallon, should help the grocer capture more trips as gas prices rise. That and an increased emphasis on just-in-time meal solutions have Winn-Dixie positioned well against rising energy costs.

“Fuelperks! is evolving our card into a loyalty instrument,” Lynch said, especially as Winn-Dixie seeks to expand its partnerships with local gas stations in honoring Fuelperks! savings. “As the price of gas gets higher, … our program becomes more advantageous to the consumer.”

Winn-Dixie’s Fuelperks! program is active across 44% of the company’s store base in 213 locations, including stores in the Jacksonville, Fla., Miami and New Orleans markets. Winn-Dixie is expected to expand its Fuelperks! program across the entire store base by the end of next year, Lynch said.

Meanwhile, Lynch also noted the Jacksonville-based grocer is augmenting its just-in-time meal solutions with ready-to-eat meals tailored to the tastes of the surrounding neighborhoods and increased merchandising of convenient-meal solutions.

Lynch told analysts that the market continues to be “very rational” in terms of passing any inflationary costs to consumers. Cost inflation was up 2.8% across the third quarter, he said, and retail inflation (the costs passed along to the consumer) was up 2.2%. Price increases across the meat category — which is a high-promotion category — are a little more difficult to pass along, Lynch said, explaining in part the 60-basis point difference between rising costs to the grocer and rising retail pricing.

Winn-Dixie on Monday posted net sales of $1.6 billion for the 12 weeks ended April 6, essentially even when compared with the same period in the prior fiscal year. Identical-store sales were down 0.5% for the third quarter, compared with the prior-year period.

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