Wal-Mart Earnings: What to Watch

By Sarah Nassauer Features Dow Jones Newswires

Wal-Mart Stores Inc. is scheduled to report its third-quarter financial results before the market opens on Thursday. Here is what you need to know:

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EARNINGS FORECAST: Analysts are expecting earnings-per-share of 97 cents, according to Thomson Reuters, roughly flat with Wal-Mart's year-ago earnings of 98 cents a share.

REVENUE FORECAST: Analysts forecast $121 billion in revenue, up from $118.18 billion a year ago.

WHAT TO WATCH:

STORE STRENGTH: Analysts expect to see gains in store sales and foot traffic, marking over three years of quarterly growth on both fronts at a time when some competitors are losing ground. Wal-Mart, the world's largest retailer by sales, has invested in its brick-and-mortar locations, raising wages for hourly employees, reducing inventory and adding more online pickup options. It has estimated that same-store sales in the U.S. will rise 1.5% to 2%, its Sam's Club business up 1% to 1.5%. In addition, since it bought online retailer Jet.com last September, several weeks of Jet sales will be included in its same-store sales figures for the first time this quarter.

E-COMMERCE EFFORTS: Wal-Mart has turned the tide on sluggish e-commerce sales growth, with U.S. online sales up at least 60% the last two quarters, including revenue from a series of small acquisitions this year. That is noteworthy in the wake of Amazon.com Inc.'s purchase of Whole Foods, and analysts have taken notice. "Today what matters most is changing the narrative to demonstrate a credible, viable strategy against Amazon," said Barclays in a research note. "Wal-Mart has made significant progress in changing the narrative."

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Wal-Mart sells over 67 million products on its site, up from just 8 million early last year, which has contributed to the increased sales, and it is marketing its site and online grocery pickup options more aggressively. It now expects e-commerce sales growth of 40% for the coming fiscal year.

PROFIT AND MARGINS: Wal-Mart's investments in its stores and e-commerce have weighed on its profit and margins, both of which continue to be closely watched by analysts. U.S. gross margins declined the last two quarters, and Wal-Mart is expected to report another slight decline for Q3. In the U.S., operating income has grown slightly the last two quarters, after a long period of decline. "Any dip back into decline would be cause for concern, especially if driven by gross margin deterioration," said Morgan Stanley in a note.

(END) Dow Jones Newswires

November 15, 2017 07:14 ET (12:14 GMT)