Walmart’s Q1 2015 Results – Comments

I found various notable items in Walmart’s Q1 2015 management call transcript (pdf) dated May 15, 2014.  (as well, there is Walmart’s press release of the Q1 results)

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 conference call comments; these previous posts are found under the “paycheck to paycheck” tag.

Here are various excerpts that I find most notable:

comments from Doug McMillon, President and CEO, page 4:

Walmart’s first quarter consolidated net sales increased to more than $850 million or 0.8 percent over last year.  Like other retailers in the United States, the unseasonably cold and disruptive winter weather negatively impacted our U.S. sales and drove operating expenses higher than expected for the company.  This, coupled with the higher than anticipated tax rate, resulted in earnings per share of $1.10.

comments from Claire Babineaux-Fontenot, EVP of finance and treasurer, page 7:

Severe weather in our U.S. businesses negatively impacted EPS by approximately $0.03.  Additionally, the company’s effective tax rate for the quarter was higher than anticipated in the full-year guidance we provided on February 20.  We continue to believe our full-year tax rate will range between 32 and 34 percent.  We may experience quarterly fluctuations in our effective tax rate, as it may be impacted by a number of factors.

comments from Bill Simon, president and CEO of Walmart U.S., page 9:

For the first quarter, we added approximately $1.3 billion in net sales, with relatively flat comp sales.  As we indicated in February, we realized negative comp sales during the first two weeks of the fiscal year from severe winter storms.  A solid start to the spring season and a strong Easter holiday drove positive comps over the remaining 11 weeks of the quarter; that’s despite additional severe weather and about 50 basis points of continued SNAP-related headwind.  Weather impacted Q1 comp sales by approximately 20 basis points.  Overall, our comp sales were down 8 basis points, in line with our guidance.

comments from Bill Simon, president and CEO of Walmart U.S., page 10:

And, of course, we also continued to invest in price, resulting in a net 17 basis point decline in gross profit rate.

comments from Bill Simon, president and CEO of Walmart U.S., page 11:

Neighborhood Markets continue to perform well, delivering approximately a 5 percent comp sales increase for the quarter, driven by a nearly 4 percent increase in comp store traffic.  We’re seeing strength across the box, particularly in produce, meat, adult beverages, and pharmacy.

comments from Bill Simon, president and CEO of Walmart U.S., page 12:

In grocery, we’ve seen a trend improvement despite approximately 90 basis points of headwind from the reduction in SNAP benefits.  Overall grocery inflation is tracking at approximately 120 basis points.  While our consumables business had a low single-digit negative comp, partly due to modest price deflation and overall industry softness, our food business delivered a positive comp.  We’re seeing the strongest results in areas such as meat, produce and dairy, where we’re investing to keep our prices low for customers despite pressure from cost inflation.  Additionally, food delivered strong Easter results, with double-digit sales growth in Easter candy and strength across other categories such as meat and eggs.


The Special Note summarizes my overall thoughts about our economic situation

SPX at 1867.43 as this post is written