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Wal-Mart Earnings – What to Expect

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Wal-Mart Earnings – What to Expect

May 18 2015, 07.40am GMT


On Tuesday morning, Wal-Mart Stores Inc. (NYSE: WMT) is set to report its first quarter earnings. So what can we expect from the world’s largest retailer in the world by sales?

 According to consensus estimates from FactSet, investors could expect Wal-Mart to report a drop in profits from $1.10 per share to $1.04 per share. In February this year, Wal-Mart forecasted profits of $4.70 to $5.05 in the 2016 fiscal year as well as 95 cents to $1.10 per share in the 1st quarter.

Also, according to FactSet, the company’s sales are expected to increase from $115 billion last year to $116.2 billion in the first quarter. Retail Metrics data showed that expectations are that same-store sales will increase to 1.3% including a further 1.6% rise at both its biggest unit Wal-Mart U.S. as well as Sam’s Club.

Wal-Mart is a component of the Dow Jones Industrial Average (DJIA) and this giant retail store saw its shares decrease 7.7% this year so far compared to an increase at Target Corp. (NYSE: TGT) of 3.5%. Meanwhile over the same period, the DJIA increased 2.5 percent.

Although the company received praise from the Main Street and the White House, in February this year, Wal-Mart disappointed investors when it revealed its $1 billion plan to increase wages for 500,000 Wal-Mart and Sam’s Club employees in the U.S. At the time, the company stated that it is unclear whether additional spend on wages could possibly reduce turnover. On the upside, the company was hoping that a wage increase would promote employee morale and then ultimately translate into better customer service and increased sales. Some analysts have said that although there may be a positive outcome, it might take some time before the benefits manifest.

Another interesting point is Wal-Mart’s online sales that disappointingly rose only 22% to $12.2 billion last year, decreasing from 30% a year-ago, which opens the question of will Wal-Mart be able to increase sales? Although Wal-Mart increasingly invests in mobile and online, the decrease in sales growth has Wall Street wondering if the company has identified the correct strategy.

In efforts to boost sales, Wal-Mart said this week that it’s testing an unlimited free service similar to Amazon-Prime at 50% the price.

A Kantar Retail survey revealed that boosting the company’s online sales will not be easy as 56% of its U.S. in-store shoppers buy from Amazon.com as well. That is a bigger than 3 times the percentage of the people who shop at Wal-Mart’s own website.

Interestingly, 21% of the company’s supercenter shoppers are also Amazon Prime members, increasing to more than double 2011’s 10 percent.

Overseas, Wal-Mart is looking to acquire some old Target location after the company decided to withdraw from Canada. Wal-Mart also reported last month that it will slow store openings in China in order to focus more on quality after a decrease in sales there.

Investors will also be looking closely at the impact that the stronger dollar (USD) will have on sales overseas. In February, Wal-Mart said that this year its foreign currency sales would have decreased around $10 billion if the exchange rates remained as-is. Another focus may be the remaining impact of the slowdown from West Coast dockworkers as well as Wal-Mart’s Neighborhood Market and plans to open up other down scaled retail spaces.

MT4 Chart: Walmart

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