Wal-Mart Reports Strong Q2 Gains

By Alan Wolf -- TWICE, 8/14/2008

Bentonville, Ark. — Wal-Mart said competitive pricing, improved customer service, and strong operating performance and inventory management led to solid sales and earnings gains during its second fiscal quarter.

Total sales rose 10.4 percent to $101.6 billion for the three months ended July 31, and operating income increased 9.7 percent to $5.8 billion.

Domestically, Wal-Mart’s flagship discount stores saw net sales rise 8.5 percent to $64 billion while operating income increased 10.8 percent to $4.7 billion. Comp-store sales grew 4.6 percent during the period.

In a recorded address, Eduardo Castro-Wright, president/CEO of Wal-Mart Stores division, said the consumer electronics category continued to exceed plan in the U.S. with “strong sales throughout the quarter in computers, flat panel TVs, video games and digital audio.”

He added that unlike other consumer sectors, CE continues to experience price deflation.

Improvements at U.S. stores include stronger merchandise quality and presentation, friendlier sales clerks, faster checkout times and improved cleanliness, he said.

Both Castro-Wright and chief financial officer Tom Schoewe noted that the domestic sales results were boosted by the government’s economic-stimulus rebate checks, which were issued during the quarter. Indeed, Wal-Mart’s outlook for the third quarter is more muted, with comp-sales growth projected at a more modest 1 percent to 2 percent.

At Sam’s Club, the company’s warehouse club division, net sales increased 8 percent to 12.3 billion although operating income declined 2.9 percent to $432 million. Same-store sales climbed 3.7 percent during the period excluding sales of gasoline, and 7.2 percent when fuel is included.

“Bright spots” among otherwise soft general merchandise sales included video games, LCD TVs, GPS units and digital cameras, reported Sam’s Club president/CEO Doug McMillon.

Corporate president/CEO Lee Scott concluded that “The combination of solid operating performance and improved capital efficiency gave us record earnings this quarter… We have improved customer traffic and ticket and overall sales growth in our markets. While inflation and higher fuel costs are pressuring suppliers, retailers and customers worldwide, we’re confident that Wal-Mart is well-positioned for this economy.”