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Walmart Misses Q2 Earnings Estimates

Helped by performance at its U.S. stores, but challenged by currency volatility, Walmart Stores (WMT) reported second quarter financial results Tuesday that beat Wall Street estimates on the top line, but fell short on profitability.

Total revenue rose 0.1% to $120.2 billion from $120.1 billion in the second quarter of last year. On a constant currency basis, total revenue was $124.5 billion. Analysts had expected revenues of $120.06 billion. Walmart U.S. sales rose 4.8% to $74 billion, while international sales fell 9.6% to $30.6 billion and Sam’s Club sales were flat at $14.7 billion.

Comp sales at Walmart U.S. increased 1.5%, driven by a store traffic increase of 1.3% that was particularly strong in the general merchandise and softlines categories. Comps at the company’s Neighborhood Market stores increased approximately 7.3%, with strong growth from new stores. Customer experience scores improved over last year.

E-commerce sales globally increased approximately 16 percent on a constant currency basis, and contributed a reported 20 basis points to overall comp sales.

U.S. gross margin declined by 41 basis points in the quarter. Gross merchandise value, or GMV, increased approximately 18 percent on a constant currency basis.

Net income in the period was $3.48 billion, or $1.08 per share, missing analyst estimates of $1.12. Currency exchange rates negatively impacted EPS by approximately $0.04.

Q2 earnings were pressured by currency fluctuations, lower Walmart U.S. margins and investments in customer experience. Consolidated operating income declined 10 percent.

Walmart lowered its full-year earnings per share guidance to a range of $4.40 to $4.70 from a previous range of $4.70 to $5.05. This range includes third-quarter guidance of $0.93 to $1.05 per share.

“Although we grew top line sales, we did fall short on managing the bottom line. During the quarter, operating expenses were higher than expected and our gross margin was lower than planned,” Walmart Stores president and CEO Doug McMillon said in a statement. “We are not pleased or satisfied. For the back half of the year, we will manage these items closely with a continued commitment to efficiency, cutting costs where appropriate, even in a period of investment.”