Wal-Mart beats earnings expectations

Wal-Mart’s earnings beat the consensus earnings view on strong international growth and efficient inventory management.

Excluding currency effects, revenue grew 2.7%, led by the international segment’s 12% increase. This is a trend we can expect to continue as the company penetrates developed and emerging international markets. The company hinted during the conference call that they may continue to be on the prowl for acquisitions that could boost international growth.

U.S. revenue was weaker, with same-store sales falling 1.5%, which was partially a result of stimulus checks the year-ago period benefited from. The third quarter should have an easier comparison and, thus, show some improvement.

Operating margins improved 0.3 percentage points sequentially to 7.6%.

Management said that the Wal-Mart customer is still being pinched by the recession, evidenced by less spending at the end of the month, using more cash than credit, and buying basics and putting off discretionary purchases.

Wal-Mart has gained market share thanks to their low-cost reputation, but it is difficult to know whether or not their new customers will trade up once the economy improves. In attempt to keep customers coming back, Wal-Mart has focused on its shopping environment by remodeling stores with less clutter and better merchandising.
WMT shares finished the day +2.71%
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Peter J. Lazaroff, Investment Analyst