For those who think this article is repost of our May recap of Wal-Mart's Q1 earnings, you are forgiven: after all it was almost a carbon copy: "Wal-Mart Misses Revenue, Guides Below Expectations: Weather Among Factors Blamed [2]." As we expected earlier [3], Wal-Mart just missed, and guided lower, although at least the company appears not to have blamed the weather for the second quarter in a row. Of course, that does not mean WMT didn't find spacegoats, and while it blamed the usual suspects of consumer spending and FX headwinds, it also accused the payroll tax of being the reason for a 0.5% drop in comp store sales. But didn't economists everywhere say the payroll tax' impact is now neligible? Finally, WMT blames the lack of grocery inflation. Really? Maybe stop cutting the price-equivalent size of your portions and the inflation will materialize.
WMT results recap [4]:
- EPS was expected to come at $1.25, instead it printed $1.24
- Revenue was expected to print at $118.48bn, instead it printed at $116.95bn
- The full year EPS outlook was been trimmed from $5.20-$5.40 to $5.10-$5.30. This new range includes third quarter EPS guidance of $1.11 to $1.16.
- Comp stores down -0.5%
- FX Effect on cash was -$103MM in H1 2013, compared to +$266MM in H1 2012.
- WMT generated $5.2bn in cash flow in H1 2013 compared to $6.1 bn in H1 2012; $3.4bn of the cash was returned to shareholders through dividends and buybacks
And now the numerous reasons for the miss:
"The retail environment remains challenging in the U.S. and our international markets, as customers are cautious in their spending. Net sales in the first six months were below our expectations, so we are updating our forecast for net sales to grow between 2 and 3 percent for the full year versus our previous range of 5 to 6 percent," said Holley. "This revision reflects our view of current global business trends, and significant ongoing headwinds from anticipated currency exchange rate fluctuations."
"Across our International markets, growth in consumer spending is under pressure," said Doug McMillon, Walmart International president and CEO. "Consumers in both mature and emerging markets curbed their spending during the second quarter, and this led to softer than expected sales. While this creates a challenging sales environment, we are the best equipped retailer to address the needs of our customers and help them save money.
During the 13-week period, the Walmart U.S. comp was negatively impacted by lower consumer spending due to the payroll tax increase and lower inflation than expected. Comp traffic decreased 0.5 percent, while average ticket increased 0.2 percent.
"While I'm disappointed in our comp sales decline, I'm encouraged by the improvement in traffic and comp sales as we progressed through the quarter. The 2 percent payroll tax increase continues to impact our customer," said Bill Simon, Walmart U.S. president and CEO. "Furthermore, we also expected an increase in the level of grocery inflation, which did not materialize in a meaningful way. We were pleased that both home and apparel had positive comps.
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"We expect the third and fourth quarters to be better than our results in the first half, and we are working hard to deliver operating expense leverage for Walmart International," added McMillon.
Well, there is hope: just hold your breath that the consumer will revive by Q5 2013. Worst case: Q6 at the latest. We promise. In the meantime, the consumer can't get to bankruptcy court fast enough [5]...