* Traffic declines in China
* U.S. discount same-store sales up 1.5 pct
* CFO Holley: all consumers under some kind of pressure
* Third quarter EPS $1.08 vs Wall St $1.07 view
* Shares fall 3.6 pct
By Brad Dorfman
Nov 15 Wal-Mart Stores Inc posted
disappointing quarterly sales on Thursday as shoppers in key
markets like the United States battled high gasoline prices and
unemployment, while store traffic continued to decline in China.
Lower prices for some food and electronics reduced Walmart's
U.S. sales, and growth at the company's Sam's Club unit also
fell short of Wall Street expectations - rising at half the rate
compared with a year ago.
Club members, who pay a fee to shop there, bought cheaper
items and traffic from business customers slowed. The results
were especially disconcerting to Wall Street since Sam's Club
has regularly outperformed Wal-Mart's discount stores.
"When you see a slowdown in sales and then pressure in
traffic, that causes investors to be cautious," Brian Yarbrough,
analyst at Edward Jones, said of Sam's Club.
Traffic at Walmart's U.S. stores was essentially flat, as
shoppers consolidated trips due to higher gasoline prices.
Adding to Wal-Mart's worries, the world's largest retailer
also said it has opened internal inquiries or investigations
into bribery allegations in Brazil, China and India - additions
to its original probe in Mexico. A New York Times article in
April disclosed alleged bribery at its Mexican unit.
"We fear this could spread further and be much bigger than
just Mexico," Janney Capital Markets analyst David Strasser
Chief Financial Officer Charles Holley declined to comment
further on the issue during a conference call with reporters.
So far the total cost of the probe has reached $98 million
Wal-Mart shares were down 3.6 percent at $68.73 in Thursday
afternoon trading on the New York Stock Exchange as investors
absorbed the details of how the global economic slowdown is
hitting the company.
"Whether you're in the UK or you're in Argentina, Mexico or
China or the U.S. or Canada, I think that all consumers are
starting to be under some kind of pressure," Holley said on the
Wal-Mart did say that U.S. sales so far this month were
better than expected, a good sign heading into the holiday
In the tough economy, Walmart is still well placed to cater
to budget-conscious shoppers, said Natalie Berg, director of
global research at Planet Retail.
"But at the end of the day, consumers are still very wary
about parting with their hard-earned cash," she said.
Total sales rose 3.4 percent to $113.20 billion for the
third quarter ended Oct. 31. Analysts, on average, looked for
$114.96 billion, according to Thomson Reuters I/B/E/S. Excluding
the impact of currency fluctuations, sales would have been
$114.9 billion, the company said.
Sales at Walmart U.S. stores open at least a year, or
same-store sales, rose 1.5 percent. The company had forecast an
increase of 1 percent to 3 percent, and analysts, on average,
had looked for a 1.8 percent gain as management expressed
optimism during a recent meeting with analysts.
In contrast, rival Target Corp on Thursday reported
a quarterly profit that beat analysts' expectations, luring
shoppers with a wider variety of food products and 5 percent
discounts for its cardholders.
While shoppers put millions of dollars of merchandise on
layaway, those sales are not registered by Wal-Mart until the
items are paid in full. That typically occurs in the fourth
quarter, closer to the end of the holiday season.
Traffic at the U.S. stores rose only 0.1 percent as shoppers
consolidated trips due to higher gasoline prices.
The Walmart U.S. unit forecast a 1 percent to 3 percent
increase in same-store sales for the fourth quarter.
Sam's Club results also disappointed, with same-store sales
rising 2.7 percent, excluding gasoline sales, compared with a
5.7 percent increase a year earlier.
Overall, the world's largest retailer earned $3.64 billion,
or $1.08 per share, in the third quarter ended Oct. 31, up from
$3.34 billion, or 97 cents per share, a year earlier.
Analysts, on average, forecast $1.07 a share.
International sales rose 2.4 percent to $33.16 billion, and
would have risen 7.6 percent without currency fluctuations, the
company said. Operating profit rose 4.8 percent.
Traffic declined 7.6 percent at its stores in China,
continuing a string of declines, and it is facing challenges in
Japan due to the economy. Sales there fell 1.8 percent and
traffic declined 1.7 percent.