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Walmart Updates FY 14 Underlying EPS Guidance For Fourth Quarter And Full Year

Wal-Mart Stores, Inc. (NYSE:WMT) today updated expectations for its fourth quarter and fiscal year 2014 financial results that the company provided in its third quarter report issued on Nov. 14, 2013. The company will release its detailed report on the fourth quarter and full year as scheduled on Feb. 20, 2014.

The company provided fourth quarter diluted earnings per share from continuing operations (EPS) guidance of $1.50 to $1.60, which included a $0.10 per share impact from two discrete items, which resulted in an underlying 1 EPS guidance range of $1.60 to $1.70. For the full year, the company expected to deliver EPS of $5.01 to $5.11 and accounting for the $0.10 of discrete items, the range for underlying EPS was between $5.11 and $5.21.

“We now anticipate that our underlying EPS for the fourth quarter of fiscal 2014 will be at or slightly below the low end of our range of $1.60 to $1.70,” said Charles Holley, Wal-Mart Stores, Inc. chief financial officer. “For the full year, we expect underlying EPS to be at or slightly below the low end of our range of $5.11 to $5.21.

“Today, we are providing updated information on previously disclosed items, as well as new additional discrete items that were not anticipated when we provided our fourth quarter and full year guidance. These discrete items will impact EPS results for the fourth quarter and the year,” said Holley.

Holley reviewed the details of these new discrete items affecting the fourth quarter results as noted below.

1 See additional information at the end of this release regarding the underlying EPS non-GAAP financial measure.
Previously disclosed items impacting EPS guidance for three months ended Jan. 31, 2014
  Provided Nov. 14, 2013   Updated Jan. 31, 2014
50 store closures in Brazil and China $ 0.06 $ 0.06
India transaction $ 0.04 $ 0.05
Subtotal $ 0.10 $ 0.11
New discrete items
Brazil non-income tax contingencies $ 0.06
Brazil employment claim contingencies $ 0.05
China store lease expense charges $ 0.03
Sam's Club U.S. staff restructuring and club closure $ 0.01
Subtotal $ 0.15
Total EPS impact $ 0.26
Note: All EPS amounts are approximate.

Detailed explanation on discrete items
  • Brazil and China store closures: Approximately 50 underperforming units between these two markets were closed.
  • India transaction: Walmart terminated the franchise and supply agreements related to retail stores. The estimated charge for this transaction is now approximately $0.05 per share versus the previous estimate of $0.04 per share.
  • Brazil non-income tax contingencies: The company is subject to tax examinations for non-income taxes in Brazil. A number of these examinations are ongoing, and in certain cases, have resulted in assessments from taxing authorities, some of which we are currently contesting. As part of the company’s standard review process and as a result of changing conditions and circumstances, the company expects to record additional liabilities related to these loss contingencies.
  • Brazil employment claim contingencies: We expect to record additional charges related to employment claims. Walmart Brazil has experienced a significant increase in employment claims in recent years as a result of company efforts to improve productivity and reduce costs. The company has performed a detailed review of potential liabilities related to these claims, as well as a review of our historical processes and practices related to accounting for court deposits required to litigate such claims. As a result of this review, the company expects to record charges to increase our liabilities and account for settlements of historical employment claims.
  • China store lease expense charges: We identified a historical lease accounting practice that did not conform to our U.S. GAAP-based global policies. As a result, the company expects to record a charge to conform to this accounting practice.
  • Sam’s Club U.S restructuring and club closure.: Sam’s Club is implementing a new in-club leadership and staff structure to better align U.S. club teams with the sales volume of each club, and expects to record a charge for severance-related costs. Additionally, one club is being closed.

The guidance range of $1.50 to $1.60 provided on Nov. 14, 2013 included $0.10 per share for the store closures and India transaction. With today’s update, the additional impact on EPS from the new discrete items ($0.15) and the change on the India transaction ($0.01) are estimated to be approximately $0.16.

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