Updated to include additional details on Walmart's third quarter.
Shares of the world's largest retailer fell about 3% in early trading Thursday as total sales rose 0.7% from the prior year to $118.2 billion, missing Wall Street forecasts for $118.8 billion. Sales were clipped by $2.1 billion due to the relative strength of the U.S. dollar since the summer months. On a call with reporters, Walmart executives downplayed the impact of the dollar and declined to say whether it would take specific actions -- such as raise product prices and close stores overseas -- to mitigate its more stellar advance post Election Day.
Earnings came in at 98 cents a share, beating projections for 96 cents a share. Walmart lifted its full-year earnings outlook to $4.20 to $4.35 a share from previous guidance of $4.15 to $4.35 a share.
For Walmart, which has seen its stock gain a cool 16% this year amid better sales due to cleaner stores and investments in lower prices, the results could have been even better if not for pesky food deflation. Unfortunately for Walmart, investors seem to be keying in on that.
Walmart U.S. notched a same-store sales increase of 1.2%, the division's ninth straight increase, but below analysts' estimates for a 1.3% increase. The company predicted an increase of 1% to 1.5%. Although Walmart saw strength in home goods, toys, and health and wellness, the U.S. business was held back by about 150 basis points from food price deflation. Sales of grocery items represent roughly 56% of Walmart U.S. sales, so it's logical that deflation on everyday necessities such as eggs would have an outsized impact.
Food deflation also hurt Walmart's warehouse club business Sam's Club by 110 basis points.