* Q3 EPS 97 cents misses Wall St view of 98 cents
* U.S. same-store sales up 1.3 pct
* Mobile apps, social networking, online push are costly
* Shares off 2.7 percent
By Jessica Wohl
Nov 15 Wal-Mart Stores Inc's decision
to absorb most of the rising food costs for its stressed U.S.
shoppers and spend on its e-commerce business weighed on
profitability, even as key U.S. sales rose for the first time
in more than two years.
Sales at U.S. discount stores open at least a year rose
more than expected in the third quarter ended on Oct. 31,
ending a string of nine straight quarterly declines. Same-store
sales have now risen for four months in a row.
But visits to stores were once again down from a year
earlier, even as shoppers, on average, spent more per visit.
The results coincided with government reports that U.S.
retail sales rose 0.5 percent in October, while wholesale
prices fell 0.3 percent.
Walmart U.S., the largest division of the world's largest
retailer, held off on raising prices as much as it could to
appeal to cost-conscious shoppers who remain concerned about
the job market and overall economy.
"They were clearly being aggressive in pricing and gaining
share, but they didn't get the leverage on the cost side," said
ITG Investment Research analyst John Tomlinson. He said the
company might look for more price "givebacks" from vendors.
Groceries cost Walmart U.S. about 4 percent more during the
quarter. But Walmart saw inflation of only 0.7 percent across
the entire store due to deflation in areas such as
televisions, price cuts and customers trading down to less
expensive options, said U.S. Chief Executive Bill Simon.
Shares of Wal-Mart were off 2.7 percent at $57.29 in late
morning trading on Tuesday.
The shares had been rising heading into the quarterly
report, after Wal-Mart said in mid-October that U.S. same-store
sales had continued to rise early in the period.
Same-store sales account for about 98 percent of Wal-Mart's
sales in the United States, so ending the slump at existing
stores is critical for the company, as its international
business has not grown as rapidly as some anticipated.
Walmart's customers remain worried about the U.S. job
market, CEO Mike Duke said on a recorded call. The company's
survey of mothers found that only one out of 10 viewed the
economy as "good," he said.
Walmart has been ratcheting up efforts to reach shoppers
through the Web and mobile apps, but those measures are coming
at a cost. Unallocated corporate overhead and other expenses
jumped about 40.7 percent to $536 million, due largely to
investment in e-commerce, Treasurer Jeff Davis said on the
Walmart U.S. same-store sales rose 1.3 percent. That topped
the company's forecast, which called for such sales to be down
1 percent to up 1 percent. It also exceeded the analysts'
average forecast for a rise of 0.3 percent, according to
Thomson Reuters data.
Walmart is offering holiday season layaway for the first
time in years and advertising its low prices more than usual as
it tries to win back shoppers who have flocked to competitors
including Dollar General Corp .
The most popular toy on layaway so far has been LeapFrog
Enterprises Inc's LeapPad, Simon said. The gadget, which
is like a tablet computer for kids, is priced at about $99.
Retailers account for a layaway sale when the customer pays
for the item in full and picks it up, so most layaway purchases
at Walmart will not count as sales until the fourth quarter.
Walmart, which has been open on Thanksgiving for years,
will start its big sales at 10 p.m. that night. It has also
lowered some prices weeks before Black Friday, the day after
Thanksgiving and the traditional kick-off to the holiday
Wal-Mart earned $3.34 billion, or 97 cents per share, from
continuing operations in the third quarter, compared with $3.44
billion or 95 cents per share a year earlier, when a tax
benefit lifted profit by 5 cents per share. There were fewer
shares outstanding during the most recent quarter.
The company had forecast a profit of 95 cents to $1.00 per
share. Analysts on average expected 98 cents, according to
Thomson Reuters I/B/E/S.
Net sales rose 8.2 percent to $109.5 billion.
Meanwhile, Home Depot Inc raised its profit outlook, TJX Companies Inc increased its
holiday same-store sales forecast, Staples Inc cut its profit viewprofit at Saks
Inc topped expectations.
Wal-Mart forecast fourth-quarter earnings of $1.42 to $1.48
per share from continuing operations. Analysts on average
It expects Walmart U.S. same-store sales to be flat to up 2
percent after falling 1.8 percent in last year's fourth
quarter. At Sam's Club, same-store sales excluding fuel should
rise 4 to 6 percent after a 2.7 percent rise last year.