WMT 3Q 2015: Lowered Guidance, a Leaked Memo and Doug McMillon’s Dilemma

WMT US reported positive same store sales for the first time in seven quarters, as consumers benefited from lower gas prices, but customer traffic fell -0.7%, the eighth consecutive quarter in a row with fewer customers, as price inflation contributed to positive comp sales

For the second quarter in a row the company lowered its earnings forecast for the full year Inventories at WMT US grew faster than sales for the ninth consecutive quarter

Consolidated net income fell 0.4% but the company reported EPS of $1.15 per share, a penny above last year due to lower share count; EPS was helped by a significantly lower reported tax rate; ROI fell due to the decline in operating income

Mixed signals as executives cite investment in wages, but reintroduce talk of “wage leverage”

graph 1 for wmts


This morning WMT reported earnings and sales slightly ahead of investors’ expectations, which had been significantly lowered over the last several months. The stock was up approximately 2% in pre-market trading. Profit fell despite a boost from a significantly lower estimated tax rate, the company said, due to “certain discrete tax matters.” A bright spot for the company was a return to positive same store sales in the WMT US division, after nearly two years during which comp sales had failed to grow. Going forward the real challenge will be to return to positive customer traffic, which has been negative for the past two years. The current quarter, which includes the critical holiday season, will be an important test for the company, particularly given the company’s apparent willingness to allow its price advantage to decline or even disappear in some markets.

What do you think?