What’s Good in Wal-Mart Q1 Earnings

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Wal-Mart Stores Inc. (NYSE: WMT) reported first-quarter fiscal 2018 results before markets opened Thursday. The retailing giant posted adjusted diluted earnings per share (EPS) of $1.00 on total revenues of $117.54 billion, including membership fees in Sam’s Club. In the same period a year ago, Wal-Mart reported EPS of $0.98 on revenues of $115.9 billion. First-quarter also results compare to consensus estimates for EPS of $0.96 and $117.74 billion in revenue.

U.S. first-quarter same-store sales rose 1.4% at the company’s supercenter and discount stores. Same-store sales in the company’s Sam’s Club stores were up 1.6% excluding fuel sales and up 3% including fuel. Total U.S. net sales, including fuel, rose 1.5% for the quarter. U.S. traffic in stores was up 1.5% year over year.

Consolidated operating income rose 1.3% year over year in the first quarter. U.S. operating income rose 0.9% for the quarter while the company’s international segment saw a quarterly jump of 9%. Operating income at Sam’s Club stores rose 0.2% in the quarter.

The good news for Wal-Mart is that e-commerce growth came in at 63% and gross merchandise value (GMV) rose 69%. The company has invested heavily in e-commerce and these numbers indicate that it is beginning to pay off.

Wal-Mart guided second quarter EPS at $1.00 to $1.08, excluding an expected net benefit of $0.05 per share related to the sale of a Mexican subsidiary. Second-quarter same-store sales are expected to rise 1.5% to 2.0% at U.S. stores and 1.0% to 1.5% at Sam’s Club stores, excluding fuel sales.

The company did not change its guidance for fiscal year 2018 EPS in a range of $4.20 to $4.40.

Consensus estimates call for second-quarter EPS of $1.07 and revenues of $122.73 billion. For the 2018 fiscal year, analysts are looking for EPS of $4.33 and sales of $495.69 billion.

Wal-Mart CEO Doug McMillon said:

We delivered a solid first quarter and we’re encouraged by the start to the year. We’re moving faster to combine our digital and physical assets to make shopping simple for customers. Our plan is gaining traction ….

Wal-Mart’s shares traded up about 1% in premarket trading Thursday, at $75.90, in a 52-week range of $65.28 to $77.05. The consensus 12-month price target was $75.18 before the results were announced. The high target is $90.00.