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Wal-Mart Reveals Masterclass On How To "Beat" EPS With Tax Rate Fudges And Buybacks
Wal-Mart's Q3 earnings, reported minutes ago, were a masterclass in bottom-line fudgery.
While the company reported a slightly better US comp store sales (ex-fuel even though the fuel impact was none for the quarter), higher than the 0.0% expected, and up from -0.3% a year ago, it appears this was largely due to further liquidations and profit-eating discounts. Because the all important datapoint, the company's EPS did beat expectations by 3 cents at $1.15, the following line that was snuck into the press release explains it all:
... the company's effective tax rate was 31.8 percent, below the previous guidance of around 34 percent, due to certain discrete tax matters. While the company benefited in the quarter from a lower than anticipated tax rate, the benefit was offset by a number of discrete charges.
So what happens if one uses the previously guided tax rate of 34%? One gets a "Consolidated net income attributable to Walmart" number of $3,587 or down $124 million from the reported number. It also means that the EPS beat of $1.15 would actually be a 1 cent miss at $1.11!
Expect the algos to thoroughly ignore this nuance. Also expect everyone to ignore the magic of buybacks, because while WMT reported an as adjusted EPS of $1.15, or the tiniest of increases from a year ago, when WMT reported $1.14, the actual Earnings not per share declined by 0.7% from $3,738 to $3,711. Ah... buybacks.
So if WMT's bottom line was artificially boosted by the oldest trick in the tax book, where did the weakness come from? Here is what it says:
Operating expenses were impacted by an organizational restructuring in the U.K. and the Hurricane Odile losses in Mexico. Net interest expense was impacted as a result of reclassifying certain store leases from operating leases to capital leases.
Finally, while everyone is expecting the US economy to soar in the coming quarters even as growth in the rest of the world grinds to a halt or goes into reverse, WMT is not quite as euphoric. To wit:
"Our earnings per share guidance assumes several important factors, including the economic conditions in several of our largest markets, and a highly promotional holiday season," said Charles Holley, executive vice president and chief financial officer. "As a reminder, our full year EPS guidance includes the four factors we discussed last quarter, which were higher U.S. health-care costs, incremental investments in e-commerce, ongoing investments in Sam's Club, and our effective tax rate. We anticipate our full year effective tax rate will range between 32 and 34 percent.
Highly promotional? Just make up for lower profits with volume: works for Amazon every time, all the time. The bottom line:
"Taking all of these factors into account, we are forecasting EPS for the fourth quarter between $1.46 and $1.56," said Holley," and EPS for the full year to range between $4.92 and $5.02, which compares to our previous guidance of $4.90 to $5.15. These ranges include our estimate of approximately $0.03 per share in charges related to the previously announced future closure of underperforming stores in Walmart Japan."
Which means that the full year guidance on an apples to apples basis was actually cut by 1 cent. As for Wall Street's consensus expectation for Q4, it was 1 cent higher at $1.57. WMT better get quite creative with those Q4 taxes. Or not:
"While historically our tax rate tends to moderate toward the end of the fiscal year, it is important to remember that assessments of certain tax contingencies, valuation allowances, changes in tax law, outcomes of administrative audits and the impact of discrete items could affect our rate," added Holley. "We are monitoring progress in Congress with respect to the extension of certain U.S. income tax legislation that expired at the end of calendar year 2013, which if not passed, could drive our effective tax rate toward the high end of our estimated range for the full year.
Which means that WMT can just blame the Q4 miss on Congress not passing the desired tax laws.
And that concludes our masterclass in EPS gimmickry.
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And they still make a shit ton and a half in profit each quarter. Let's not start sucking each others dicks about the downfall of Walmart just yet.
Just wait until the Aldi's and Lidl's get a foothold in the US market.
They're decimating the UK supermarket cartel (Asda is one and is owned by Walmart) piece by piece.
Give it time.....give it time.
Aldi has been here serving the low end for twenty years or so... no foothold yet....
$1.69 milk (same shit injected as other stores), cheap produce, their chocolate is good and salads are $.50 cheaper than HEB (texas).
I wouldn't feed SHEP dog food to my enemies though.
You must shop Kmart.
https://www.youtube.com/watch?v=HKhZD2eqjEs
Isn't the target demo of Wal Mart now too poor to shop there?
yes...it has been speculated quite a lot also that once the FSA got a chunk of their EBT/SNAP allowances cut this year it directly affected Ghetto-Mart's sales.
I don't go into a Ghetto-Mart unless I'm looking for some ammo. And they don't have shit for ammo anymore in most places.
I haven't gone in years. It is seriously hellish. There's always some obese EBT trash in front of me buying Hawaiian Punch and Funions with my hard earned money. I'm kind of insulated from real America where I am, and when I venture into that land it is always a rude awakening.
They do deliver over $50 tho....for free! But I don't know if that applies to ammo lol.
WMT is an EBT/SNAP/WIC store. WMT would be losing money if it wasn't for food stamps and welfare.
McDonalds has the same demographic of zombies. Stay out of MCD because the food is fake and there is usually a drive-by or riot in their "restaurants."
There is something about their cashier woman with their face tatoos that makes me uncomfortable.
don't know much about algebra....but i do know that the super walmart near me has been major empty every friday between 2-4pm and it wasn't that way 3 years ago. now i cruise up w mom to buy her weekly catfood for the feral cats and we park at the front door in stead of half way back in the lot. fwiw.
OMG! What’s up with women and these feral cats?
The Wal-Mart by me has feral cats living in the Pepsi machine.
Please don't feed feral cats!! They spread ring worm and breed like rabbits. We have made it illegal where I live due to the spread of ringworm on the beach...where kids play...but these women just keep at it.
Get a dog.
i trapped them all. all were spade/neutered, their ears were knocked to show they are fixed, they were innoculated and all for the bargain price of 75.00 per cat. (gottta keep momma happy)
Catch, neuter, and release is the best practice when it comes to feral cats. Basically, you take the baddest mother-fucker cat, neuter him, and put him back in his territory so he can defend it against other feral cats. If you remove them (which your mom isn't apparently), then new, un-neutered cats just move in to the territory.
If you have to go to ghetto mart, wait until the last week of the month. It is a known fact that EBT cards are used up by then, and the shit hole will be nearly empty.
Awww. Good son. Hope my son loves his momma the same!
"Tax Rate Fudge"
...So, is 'at like defecatin' on a revenuer?
What? no people getting fired?
Is this the new normal to boost share prices?
weird...
Who are they going to fire?
They don't have enough people working there now to look after customers or unpack boxes and stock shelves.
Mind you they can fire one of their "executives" and with his/her salary and benefits put 1,000 - 2,000 people to work without raising prices and maybe having happy customers. Nah, happy customers are not what this is about anymore is it?
They now have robot greeters that don't limp or drool so I'm thinking this first and the cashiers second although they will have to hire more security or looting will be rampant.
In most companies, there's VERY few executives who earn more than 200x the entry level position, often not more than a dozen or two. Maybe if they turfed the entire board of directors, the recovered money could put 1,000 people to work, but then of course the company would quickly run aground by the lack of leadership in what is a highly competitive low margin industry.
No worries, the great Amerikan shopping hoards will flood wally world and lap up all the unbelieveable holiday plastic crap they can load into their over sized carts. Plenty of fights will break out as the fat assed morons snap up this years "must have" junk.
EBT proudly accepted!
Black Eye Friday
In the good old days, when a company didn't do all that well...
the boss would torch the place and collect insurance money to make money.
A lot less paperwork!
"Discrete Tax"?
Does that mean hookers or payoffs are involved? .gov don't care if it is legal or not as long as they can tax it.
Whether it is moral or not, that went out the window decades ago. That is why the rest of the world is shrugging its shoulders and putting Obama in the 'women's club'
I was thinking the same thing. Discrete charges to get your tax rate lower. Umm, campaign donations? IRS agent payoffs?
Wal Mart..................is a conduiate for the collapse of the USA by selling imported crap from elseware.
The sooner countries start buying goods only made in thier own country the better they will all be.
The world market is a is at best a 3 card monty trick.
All countries should only be able the export the same amount as they import.
Those counties that export oil should only get what they import for said oil.........that would keep the price down
my rant for the day!
http://beforeitsnews.com/alternative/2014/11/urgent-sensitive-wal-mart-memo-what-do-they-know-that-we-dont-fact-theyd-be-one-of-the-first-to-know-about-a-collapse-3060610.html
For what it's worth...........
A great idea. No trade deficits for any country. Imports = exports.
No deficit, no debt.
To expand on that, if government spending were limited to earnings, that would be another coup.
We would all sleep easier at night not having to worry about how we are going to pay 3,000 people, feed them and so on while they float around the world in an aircraft carrier shaking their fists at passers by.
That is marvelous ain't it? Makes me feel all skittles-n-unicorns. But {and i hate to break it to ya} next year, when you get in the second grade, they will teach you that things are slightly more complex.
Was buying a razor the other day. 75% of the alotted area was for one brand that is incredibly expensive and lately has major quality control issues. The rest of the area had maybe 2 brands. The result of buy the shelf at wal mart for your product scam they have been running for years. Anything that has more than 5 moving parts also has one or two missing and it's your job to bring it back and hours in line while a lazy person tries to decide if you're a frequent returner or not. Not to mention some of the frozen doesn't seem as fresh as it once was. Don't need wally world anymore thanks.
Joined a shave club. Huge savings. Done.
I just bought some old Gillette, Gem, and Schick safety razors and a bulk pack of blades. No more buying crappy disposables with 17 blades and a vibrator and still getting a shitty shave.
These are shaving tools that will be serving my kids' kids and beyond.
I have had a Norelco for about 20+ years. Works like a champ everytime. Those Dutches are like the Germans and they make good stuff. Not like Obama's feral Amerikans.
Stopped shaving 50 years ago. Just a trim every month.
Ditto with a pro barber. Only the wife trims the hair.
Saved many, many thousands and still warm in the winter...
I'm looking forward to Black Friday, not for the deals or 'shopping experience' but the Youtube videos of the fights!
WORLDSTAR
Well here's an early present just for you!
Wait for it...wait for it...SMACK!
https://www.youtube.com/watch?v=udRl9al1h-Q
Walmart backed barry in the 2012 election in exchange for openings in and around Chicago
barry has hit chewing gum on the IRS, so nothing matters and anything goes for friends of barry
Like every place else it's quite evident to see that they are cutting corners and have been for about 2 years now. Walmart shit the bed right after Sandy Hook when they removed the guns and ammo was scarce. Coincidence I don't know but that's when I noticed it here. Grocery stores are the same way. Their shopping carts are all broken, the straps for the babies are missing or snapped. The food quality is crap with many perishable items at or near the expire date (Walmart particularly bad with this). Less employees in the store. Those who are there would rather be anywhere than there which is easy to tell. Easy to see if you open your eyes. It's pretty much an epidemic in the US right now even in white collar professional environments. I think people are sick of the sociopaths at the top stealing all the money and leaving them scraps. Or at least that's what they tell me and what I hear when I overhear them complaining. How long can it go on like this? Who knows.
Police notes have daily reports on shoplifting at Wal-Mart. The shit people steal...games, booze, make up and, perhaps some factory "food".
The new normal:
- What does your company produce?
- My company produces good financials.
Another example of how you can manipulate numbers to tell the story you want.
the old CFo joke (before Sarbanes Oxley supposedly) -
CEO to CFO - what's the quarterly number?
CFO to CEO - what do you want it to be?
a number of discrete charges (our lawyers advise us not to elaborate)
... our lawyers told us we'd be crazy to elaborate.
There, fixed that for you! No, don't thank me.
discrete changes - WTF????
I'm a CPA and have done my share of financial reporting. I've never used language or wording such as "discrete changes". Those words are totally SPIN.
my guess is walmart has some serious process, controls or ? problems - somewhere.
Read the reogranization in the UK? WTF - when does a reorg make worthy of sentences in the quarterly earnings release - ? - ?
Wow -
NoVa
Someone wrote a great post here a while ago about Wal Mart and their importing of shit from China. It was an outstanding analysis. Essentially, when China's currency goes up and some other things then WMT's supply chain will literally fall apart and get very bad in an exponential way. They said you will see more and more empty shelves and it will get bad very quickly.
WMT is the welfare and food stamp store and they know it. The new stores have about 75% food and the rest is stuff from China. They would be dead without footstamps, welfare and illegals.
don't forget pharmacticals.. Each store has a pharmacy and Walmart has the lowest prices in the US and is the largest drug store.
I get my insulin there once a month and it is much cheaper than rite aid and target.
What I have noticed in the last year is that my walmart and probably most others no longer have greeters/receipt checkers at the entrances. and there don't seem to be as many stocker/helpers on the floor.
So WalMart's earnings are really nothing to get excited about. Just a reason for the market manipulators to raise the Dow to a new all-time time high.
ah ..declared profits taxed at above 30% ...big tick...declared profits held elsewhere and not full profits because of the exploitation of transfer pricing and regualtory arbitrage ...bigger cross..
tax rate on actual profits = 11%
works until every "investment" to be tax efficient pays a negative rate of return and then...you get tax losses!
great..same as it ever was
I have not been in a Walmart in five years. All they sell is crap from China - they should be called China Mart. Their executives should be tried and executed for treason, their stores should be looted and burned to the ground and the US should bar any and all goods from China from entering the country. I never buy anything made in China.
Then you must walk around with a Jack Daniels barrel covering you. Are you sure the suspenders weren't made in China ??
I do like the Wal-Mart self checkouts. They always seem to miss a few items at check out.
Yeah, it must be a science for folks who do that kind of thing. Why imagine shoving tons of exspensive small things, inside a big box of cheap things, and scanning it and walking right out the front door.
This must be a huge problem for Home Despot
I have noticed that Wal Mart doesn't thave much selection in their grocery area. Look at cheese; the inhouse brand or Kraft. The same is true of just about everything there. No go to the grocery store and you have a wide selction of brands for just about anything. My grocery store has like 7 major brands of cheese.
It seems a lot of companies will not do business with Wal Mart anymore.
I go to two Wal-Marts, in the city (Rochester, NY) and one about 40 miles away in a rural locale. The differences are startling. First, all the city employees and shoppers are either black or hispanic (not that I have anything against them, because that would be racist), the shelves and general upkeep in the city store are disheveled and sloppy and I don't go there any time between the first and fifth of the month (lines are too long and crowded with EBT card-users many of whom don't know how to swipe the card and pay for shit).
The rural Wal-Mart is bright, white, and the people, though they may be hicks, aren't drooling slobs or absolute morons. Most of them are nice and friendly. Shelves are always well-stocked, the floors are clean and there are rarely, if ever, long lines. If I go there at 8:00 am, I'm one of maybe 20 shoppers, and there's never a line at checkout.
Problem is, volume-wise, I'm sure the EBT city store does much more, so, in the case of a total breakdown of the company, the one in the sticks would probably close first. Fine by me, since I'll be moving to the country location soon, and opportunity abounds when a Wal-Mart shuts down. Wouldn't miss it. Rather do business locally, keep the money in the community and all that good stuff.
Disclaimer: I hate Wal-Mart generally, and buy mostly just food and a few clothing items. Spend less than $70 a month there only because they actually do have some good, low prices.
ZH has a hard on for buybacks for some reason, last I checked it increased the value of your shares and increased dividend payments, in Tyler's world dilution is a good thing.
i think it is debt-based buybacks that ZH has a problem with.
Creative number crunching. Must have gone to Jack Welch school of financial reporting.
Been years since I have been in a wally world store, however, due to desperation for Ball wide mouth canning jars and 150 pounds of cranberries to process, I attempted to call them first to see if they had any in stock. I attempted 2 stores and both left left me on hold. It was a qick reminder on why I no longer shop there. Screw them will buy elsewhere.
valley chick
http://www.amazon.com/s/ref=nb_sb_noss?url=search-alias%3Daps&field-keywords=Ball+wide+mouth+canning+jars+
Walmart's future depends on the success of the TPP.
No TPP, no Walmart as we know it today.
There is nothing else. No place to park money in savings at 1/4 %. Just get out and borrow cheap Fed money and buy cheap goods at Wal-Mart. Sales fall and you borrow cheap Fed $ and buyback stock. What else is left? Use cheap Fed $ to prop up everything or it all falls apart. Extend auto loans out to nine years and use cheap Fed $ to hand out loans to anyone. They will clamor soon to foregive student debt and free up another trillion for home purchases. Pretty simple plan and no other options.
The discrete item was a release of valuation allowances or a favorable audit resolution?
That's not going to carry Walmart very far.
I smell some former Arthur Anderson vermin.
The WallyWorld in our town seems to be the end of the line for deliveries of merchandise and doesn't hire enough people to keep shelves stocked. Somehow management overlooked for TWO YEARS that there was no lemon flavoring on their shelves...alternately the orange and others have taken their turns absent. The latest absentee I noticed is aluminum-free baking powder.
In various aisles, no shelf tags on certain brands though others have them. The paper goods aisle locally is infamous for this, can't compare prices without taking a long walk to a cashier and back. Same with many other classes of products. Most recently, prices in the veggie aisle are missing. It's always some new affront. I no longer shop there first, figuring that I can save time and gas if I pay a little more somewhere else.
I can't fault the help at our local WM, they're pretty darned nice. A less-local WM is a great store, always nicely stocked. The manager that used to work at our store (when it had the highest sales in the region) transfeered to the less-local store and, as ours was previously, it's clean, well stocked, and always busy.
And so it goes. The management at Wlamart central is the problem. I'm convinced that Walmart management hates and has contempt for customers. They display that by being uninvolved with customers online; there's no place to complain except calling 1-800F.U.
Freddie Bbbut, every vendor in my town (there are many fewer than before 2007) carries that same stuff!!
I visited the hardware store with a sample problem screw, and on advice of one of the older guys who've worked there for ages and usually know what they're talking about, bought a couple of screw drivers I thought might to the job I needed done on the screws in my (aged) DCS stove (mfd by Elmira Wire & Steel NY). Took the tools home, same old shit as Walmart, they didn't turn the stuck screws, so I can't remove the part I need to remove in order to give the stove a thorough cleaning. Grr.
Stores in our town mostly are national chains, the only locally owned shops are in a small downtown main-drag area but they sell nothing but clothing or high-end decorator fluff (where does that come from?), and there's a family owned shoe repair, a couple of second hand shops, a government housing agency has rented an empty unit between the bar and the family-owned Greek restaurant.
So no old-time hardware stores carrying things made in US. Is ANY tools made in US anymore? If so, what brands and where can they be purchased? Please don't say Sears, because their tools aren't what they used to be and Sears sells made-elsewhere crap in all departments. The Sears store in our town has survived for years on their appliance sales but not anymore, though they're great on customer service. Only two or three cars in their parking lot daily.
So what I'm saying is that there's nowhere in my greater suburban area to get anything except what's stocked everywhere else too including at Walmart, all mostly are outlets for products from somewhere else. There used to be a lot of locally-owned fixit stores around but the people got old, sold out or died, and nothing replaced them because most kids went to school and learned sociology or how to shuffle papers (in financial offices).
It may feel good to dis Walmart, but I think its the same problem in most stores in most towns in the US, not just Walmart -- though they are a huge vendor and a big target. I wonder, though, if Walmart went back to their "only products made in USA", if there would be anything on their shelves.
If Ur tryin to remove rusted screws/bolts, then try gun bore cleaner.
Will dissolve any carbon deposits. Also try PB Blaster. All of these require soak and wait.
Worst case, use a torch and 1/4" wrench to slowly, slowly loosen the bitch...
You need a manuel impact driver. Looks like a screw driver on steroids. You pound it with a drilling hammer. Spray some penatrating oil on the screws first. Harbor Freight has cheap but servicable Chinese tools or try Sears for American made.