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JCPenney's Ron Johnson: 'Customers Don't Get Our Pricing Strategy'Wal-Mart Stores, Inc. (NYSE: WMT) got the business day off to rollicking start reporting an 11.5% jump in third-quarter profits. Net income was $2.65 billion, or 63 cents a share, which met analysts' expectations. Sales increased 12% from a year ago to $83.5 billion.
The stock closed yesterday at $46.32 and in pre-market trading as of 7:15 am was up to $46.75. We'll see where the stock is by the end of the conference call, which is scheduled to start at 7:30 a.m. ET.
7:30 a.m.: Lee Scott, president and CEO, says "although pleased" with results, sales were "softer than hoped." He went over the numbers in the press release. Looking ahead, he promised the most aggressive pricing ever for the holidays in toys and electronics.
"You'll hear the word Christmas," in stores and in advertising, he promised.
This month Wal-Mart is opening 21 stores in U.S. "just in time for holiday shopping," he says. Now he's going over jobs created at new superstores.
In international, he promises a "bright future." New stores in Mexico are doing well and Canada superstores are open. Meantime, the company has exited South Korea and Germany. India is developing.
Next year Wal-Mart will open 60 million square feet of retail space in 600 new locations, says Scott. That's slightly less square footage growth. He promises to make the most "efficient use of capital." He highlights efforts to control "capital expenditures."
Now he's crowing about the $4 generic drug program Wal-Mart launched recently, along with other ways Wal-Mart has "contributed to society" -- "not just in the U.S., but around the world."
7:42 a.m: CFO Tom Schoewe is going over the financials in more depth. He points out that "if we remove all the noise in the numbers," Wal-Mart gross margins would have increased. That is despite transportation cost increases.
Interest expense is up because of higher interest rates and new debt from acquisitions. But he says progress with inventory management has offset some of that increase.
He expects the company's annual tax rate to be 34%.
Sale of South Korea resulted in $103 million pre-tax gain. Germany sale was a $918 million loss, but only $55 million was recorded in third quarter (the rest in the second). There were tax gains to offset the loss.
7:50 a.m.: John Menzer is now discussing U.S. operations. Although he wasn't thrilled with results, he said he was glad the company was successful in improving "customer relevancy, market segmentation, and improving labor productivity and gross margins."
Interesting to hear him talk about all the improvement in labor productivity when labor has been such a sore spot for the company's public relations efforts!
He says strong sales generated by last year's hurricanes made for "difficult comparisons" this quarter. Strong sales last November will make the fourth quarter comparisons difficult as well.
Disappointments include women's apparel -- which wasn't as successful as hoped -- although he says it is working in more urban neighborhoods.
Price rollbacks are underway. "We are not waiting until the day after Thanksgiving," for discounts, he says. He has mentioned the $398 laptop a few times now!
Hey, he mentioned online for once -- he encouraged shoppers to visit stores and online!
8:00 a.m.: International operations: currency gains helped. More discussion of what was strong (Canada, Mexico), what wasn't. 16.8% sales gain in Mexico with 16.3% increase in customer count and average ticket size. Canada had increases in sales in mid-single digits.
In the United Kingdom, there is "continued improvement" in operating income, due to higher gross margins and cost-cutting programs. High single-digit sales growth and increased market share in U.K.'s Asda division.
Brazil was a head of plan, Argentina "continues to deliver," Puerto Rico sales were up thanks to store expansion (but PR is experiencing an economic downturn).
China grew in mid-double digits. Japan showed "progress." Now, back to Tom to discuss Sam's Club.
8:07: Sam's Club increased sales 4.5% in the first nine months of the year. Enjoyed operating income growth, but also an increase in operating expenses. Inventory levels grew at a higher rate than sales in the quarter. He expects comparable store sales to improve in the fourth quarter (doesn't seem a stretch goal!).
8:10: That's the end of the call! The "digital replay" service just cut me off (hey, when did they tape this thing anyway, last week?). Wal-Mart, which didn't make a webcast available, has also apparently chosen to end the call without including any analyst Q&A -- that's where investors usually get the meat on the bones of the earnings release.
Wal-Mart had some decent results this quarter to report and the stock is now up to $47.35 in pre-market trading (from yesterday's close of $46.32). Still, I have to say, in terms of investor relations, Wal-Mart seems to be heading in the wrong direction.
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Reader Comments (Page 2 of 2)
11-17-2006 @ 10:26PM
Marsha said...
I don't care where I shop as long as it is something I like and it is a decent price. As for the person on number 13. Why don't you give it a rest about the gays, I am not gay and I know people that are, that would give there shirts off there back to help others out. they are no different fom the rest of us except they like the same gender so why dont you grow up and stop worrying about what gender other people like and look in your own window.
For the person on number 15,
Hope this doesn't sound rude I just wanted to clarify the sizes in China. Just wanted to let you know that for China sizes you dont have to go up 4 sizes for the clothes to fit because China sizes you actually go down to sizes from what you normaly wear.
11-17-2006 @ 11:01PM
Petra said...
Well yes, Walmart is going to phase out Layaway and a lot of people are unhappy about that, but here's the thing(think as if you were the company owner for a minute):Shoppers put loads and loads of merchandise on layaway- with good intentions-but most of the time they can't come up with the funds to actually purchase the goods. So: here's all this merchandise tied up in a Layaway wich otherwise could have been sold.Get it?? Layaway is soooo yesterday!! There's many other options!! And all you people that can't come up with a couple of hundred dollars for christmas: just save30-40 bucks a month!That's not a lot, really.Just cook dinner at home a couple of times a month instead of take-out or going to the restaurant.Trust me it'll add up!
By the way:I do work for Wal-Mart and I'm lovin' every minute of it!!All you Wal-Mart Bashers out there:If you've never worked for this great company: You just don't know what you're talking about!!
11-17-2006 @ 11:23PM
lisa brunell said...
walmart please bring back your lay away program
us working people need it now we have no choice but to go to k mart for uor lay away shopping needs
11-17-2006 @ 10:41PM
janet said...
To #12, Toni - are you SURE you worked at WM???? Sorry but your're wrong on the layaway - I am a current employee - Putting something ON layaway STOPS on 11-19 and MUST be picked up BY 12-8!!! This is the FIRST year that layaway WILL NOT be available on Black Friday. Prior to this year, Layaway was ALWAYS an option on Black Friday. Perhaps you only THOUGHT you worked at WM at some point!!!
11-17-2006 @ 10:59PM
Francie said...
I shop walmart and do MOST of my Chirstmas shopping there. I will NOT use walmart this year. i cant believe you are doing away with Layaway! If you dont want to have layaway then fine...but it should be around for at LEAST CHIRSTMAS every year! Alot of people cant afford to just go out and buy everything they need, so they use layaway. Middle or low income families shop walmart ..not the rich...sooo you tell me....do you think Walmart's sales will be as good this year??? NOT!!
11-18-2006 @ 12:27AM
wptinsider said...
Walmart calling "Christmas" "Christmas" again will increase their 2006 holiday sales or at least will bring the scales back to where they were before they changed to "Holiday Shopping."
Loosing layaway is going to really hurt Wal-Mart as their current customer demographic relies on this.
I'm hoping they researched their client base before making this bold move or they will end up being where lay away currently resides this year - "gone."
11-19-2006 @ 5:01PM
sharon said...
reply to #21.
So you like Walmart. That great but you aren't thinking that a lot of people don't eat out but live on a fixed income and looks forward to layaway for buying tho things for thier family at Christmas time. I'm so glad you have money for other's don't. Take your head out of the sand and wake up.
11-19-2006 @ 5:03PM
sharon said...
reply to #11
Take your head out of the sand.
BLACK FRIDAY did have layaway. For I would stand in line for 2 hours or was I just dreaming it. You must be getting senile not to remember the layaway lines on BLACK FRIDAY.
11-20-2006 @ 12:02PM
Teresa said...
This is in reply to #21. Since you have such a great job you must be making bookoos of money with Wal-Mart. I know for a fact that Wal-Mart doesn't pay very good wages to their employees. Last night I was at Wal-Mart taking to one of the boys who brings the shopping carts in from the parking lot. He's being paid $6.25 an HOUR to do that. Just how rich can he get off that when he has a family to feed? Wal-Mart can afford to lower their prices even more than the do right now and pay their employees more money (the ones who don't sit on their ass in an office job).
As for layaway, Wal-Mart never loses money on their layaways. They buy ALL their products for pennies on the dollar and charge exorbitant prices. Poor people need layaway. People on fixed incomes need layaway. Have you ever been on a fixed income? If not you need to see how the REAL people of America live.
My husband and I live on $669 a month. That pays for our house, electricity, heating fuel, gas for the car, and groceries. Where am I supposed to get the $30 or $40 to save each month? No, we do not get assistanc on our rent or food. Try living on that every month and tell me where you would get the extra money. Most Americans aren't as well off as you are.