Walmart’s Q2 2017 Results – Comments

I found various notable items in Walmart’s Q2 2017 management call transcript (pdf) dated August 18, 2016.  (as well, there is Walmart’s press release of the Q2 results and related presentation materials)

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 management call comments; these previous posts are found under the “paycheck to paycheck” label.

Here are various excerpts that I find most notable:

comments from Doug McMillon, President and CEO, page 2:

We exceeded our Walmart U.S. comp sales guidance this quarter, with Walmart U.S. delivering comp sales of 1.6 percent, driven by a traffic increase of 1.2 percent. This was our 8th consecutive quarter of positive comp sales and our 7th consecutive quarter of positive traffic. I’m encouraged by what I’m seeing when I visit stores and pleased with how Greg Foran, our leadership team and our associates are executing our plan to win. Our customer satisfaction scores continue to improve, and the team did a great job of managing the flow of inventory again this quarter. Comp store inventory was down 6.5 percent and in-stock levels are up.

comments from Brett Biggs, EVP & CFO, page 9:

Gross margin increased 33 basis points in the quarter. Improved margin rates in food and consumables were a contributing factor. In addition, we had improvement in our cost of goods due to savings in procuring merchandise, lower transportation expense as a result of lower fuel costs and some improvements in shrink. These benefits are somewhat offset by the implementation of the multi-year strategy of incremental price investments.

comments from Brett Biggs, EVP & CFO, page 10:

Operating expenses increased 8.3 percent over last year due primarily to the previously announced associate wage rate increases and investments in technology. We remain focused on managing expenses with an EDLC mindset while elevating the shopping environment for customers. Overall, the SG&A increase was partially offset by improved gross margins, resulting in an operating income decline of 6.2 percent.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2182.22 as this post is written