Walmart’s Q3 2014 Results – Comments

I found various notable items in Walmart’s Q3 2014 management call transcript (pdf) dated November 14, 2013.  I view Walmart’s results and comments as particularly noteworthy given their retail prominence and focus on low prices.  I have previously commented on their quarterly conference call comments; these previous posts are found under the “paycheck to paycheck” tag.

Here are various excerpts that I find most notable:

comments from Bill Simon, president and CEO of Walmart U.S., page 10:

Net sales grew to $67.7 billion, up approximately $1.6 billion or 2.4 percent, while comp sales declined 0.3 percent, driven by a 0.4 percent decline in traffic. Comp traffic was up slightly from the second quarter. Operating income increased 5.8 percent to over $5.1 billion.

comments from Bill Simon, president and CEO of Walmart U.S., page 11:

Let me share more details about our financial results for the third quarter. Our gross profit rate was up slightly at 9 basis points, with gross profit dollars up 2.7 percent. This was less than the 23 basis points increase in the second quarter. We continued to strategically invest in price, funded by cost of goods savings and expense leverage.

comments from Bill Simon, president and CEO of Walmart U.S., page 15:

Each of our formats is rapidly converging with our digital platforms through the continued development of programs like ship from store, Scan & Go, lockers and more. We’re focused on innovative ways to serve the customer, like the grocery delivery test which we recently expanded to Denver. To complement these programs, we’re expanding our endless aisle, giving our customers the ability to shop anytime and anywhere. We’ve more than doubled our online assortment over last year, going from 2 million skus to more than 5 million, primarily driven by Marketplace growth. We’re also investing in our digital platform, building fulfillment facilities to further enable convergence, improve shipping speed and drive supply chain efficiencies.

comments from Bill Simon, president and CEO of Walmart U.S., page 16:

We have robust plans in place to help our customers save money this holiday season. While we’re somewhat encouraged by the momentum coming out of the third quarter, we know the customer continues to be challenged by ongoing uncertainty around healthcare costs, the payroll tax increase and recent SNAP reductions.

Based on these factors, we’re currently forecasting a relatively flat comp in the fourth quarter for the 14 weeks ending January 31, 2014, according to our 4-5-5 retail calendar. Last year’s 14-week comp was up 0.3 percent.

comments from Charles Holley, CFO, page 30:

Last quarter, I told you that our expectations for the back half of the year would be through a lens of cautious consumer spending, and I believe that we’re seeing that play out. In the third quarter, we invested strategically in price across all of our segments, and we made progress on expense leverage. Although it was a challenging quarter from a sales standpoint, we’re encouraged that we continue to manage our business well and deliver consistent solid returns for our shareholders.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1790.60 as this post is written