Walmart’s Q4 2014 Results – Comments

I found various notable items in Walmart’s Q4 2014 management call transcript (pdf) dated February 20, 2014.  (as well, there is Walmart's press release of the Q4 and Full Year 2014 results)

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 Claire Babineaux-Fontenot, EVP of finance and treasurer, page 9:

Strategic price investment within all three operating segments contributed to a 40 basis point reduction in our gross profit rate, bringing it to 23.9 percent for the quarter.

comments from Claire Babineaux-Fontenot, EVP of finance and treasurer, pages 10-11:

For the 53-week period ended January 31, U.S. comp sales, without fuel, decreased 0.4 percent.

While our gross profit grew 1.5 percent, our gross profit rate declined 3 basis points to 24.3 percent, which reflects our ongoing investment in price, as well as our global merchandise mix.

comments from Bill Simon, president and CEO of Walmart U.S., page 13:

Net sales grew by $1.8 billion or 2.4 percent.  For the 14 weeks ending January 31, comp store sales were down 0.4 percent, with ticket up 1.3 percent and traffic down 1.7 percent.  In the absence of a reduction of government SNAP benefits, which represented approximately 40 basis points of impact to comp sales, we believe the quarter would have been flat.  Additionally, comps were pressured by winter storms, which forced the closure of over 200 stores at some point over the course of quarter.

also:

In addition, we continue to be pleased with the strength of our small formats.  These stores continue to deliver positive comp sales and traffic increases each quarter.  In fact, comp sales, without fuel, for Neighborhood Markets grew approximately 5 percent for the 14-week period.

also:

Gross profit increased 0.8 percent, with our gross profit rate down 41 basis points, driven primarily by a commitment to price leadership.  Our customers rely on us to deliver low prices on the items they want most.  We believe our price investment was a material driver to accelerated share gains and positive comps during the holiday season.

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

Gross profit for the year increased 1.8 percent, with a slight gross profit rate decline.  Price investments were offset by cost of goods savings initiatives.

comments from Bill Simon, president and CEO of Walmart U.S., page 18:

In the first quarter, we expect the retail landscape to remain challenging.  Comp sales were down at the beginning of the 13-week period, due largely to continued winter storms.  However, we’re encouraged by our underlying business trends and anticipate a positive sales comp for the balance of the quarter.  Therefore, we expect a relatively flat sales comp for the 13-week period ending May 2.   Last year’s 13-week comp ending April 26, 2013 was down 1.4 percent.

David Cheesewright, president and CEO of Walmart International, page 20:

Around the globe, the holiday season was softer than we would’ve liked, particularly in our larger markets, as we continue to see customers manage on a relatively tight budget.

Gross profit rate, on a reported basis, fell 53 basis points and on a constant currency basis, decreased 44 basis points.  This was primarily driven by price investments in Brazil, Canada and Mexico.

comments from Charles Holley, CFO, page 38:

• We delivered over $473 billion in net sales.  E-commerce sales grew over 30 percent to more than $10 billion, including acquisitions.

comments from Charles Holley, CFO, page 41:

Let’s turn to guidance. We expect economic factors to have more negative than positive effect on our outlook. Now, you’ve heard today about some of the factors affecting the U.S. business, including reductions in government benefits, and along with higher taxes and tight credit, these items will continue to weigh on our customers.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1829.11 as this post is written