Wal-Mart Share Repurchases Fall to 19.6 Million in Quarter

Richard Teitelbaum
Nov 18, 2016

Wal-Mart Stores Inc. bought back 19.6 million shares in its fiscal 2017 third quarter for about $1.4 billion, a sharp decline from the previous quarter, when it bought back 30.3 million shares for about $2.1 billion.

The company also paid about $1.5 billion in dividends in the quarter, said Brett Biggs, Wal-Mart’s chief financial officer, on the company’s earnings call Thursday. Last quarter, the company paid $1.6 billion in dividends.

The fall off in share repurchases likely reflects Wal-Mart’s increased investment in its business, said David Schick, lead retail analyst at Consumer Edge Research.

“A combination of capital investments in technology, both for e-commerce and in-store capabilities, [combined with] greater wage investments would naturally leave less cash flow available and slow the pace of share buyback[s],” Mr. Schick wrote in an email. “This confluence makes sense given Wal-Mart reinvesting in the business.”

The company signed a $3.3 billion deal in August to buy online retailer Jet.com Inc..

Wal-Mart said it remains committed to returning money to shareholders. “During this transformational time, a key priority remains using our financial strength to provide strong cash returns to shareholders in the form of dividends and share repurchases,” said Mr. Biggs, according to a FactSet transcript.

Year-to-date, the Bentonville, Ark.-based company returned $10.9 billion to shareholders, he added.  At the end of the third quarter, the company had used about $8.7 billion of its $20 billion share repurchase authorization, Mr. Biggs said.

Operating expenses increased 8.6%, mostly due to a previously-announced wage  increases, as well as technology investments, Mr. Biggs added.

Nevertheless, gross margins increased 0.32 percentage point.“Savings from procuring merchandise contributed to margin rate improvement in general merchandise, food and consumables,” Mr. Biggs said. “In addition, transportation-related fuel-cost savings favorably impacted results.”

A Wal-Mart spokesman said, “We do not have anything to add beyond the comments Brett Biggs provided today.”

Wal-Mart  on Thursday posted a profit of $3.03 billion, or 98 cents a share, versus $3.3 billion, or $1.03 a share, a year ago. The company had projected per-share earnings in a range of 90 cents to $1.

Revenue rose 0.7% to $118.2 billion, below analysts’ projections of  $118.69 billion.

Same-store sales in the U.S. rose 1.2% for the quarter, the ninth straight increase, and foot traffic rose 0.7%, down from the previous quarter’s rise. Meanwhile, e-commerce sales were up 21%, boosted by the purchase of Jet.com .

Wal-Mart shares closed down 3.1% at $69.19 Thursday, according to FactSet.

http://blogs.wsj.com/cfo/2016/11/17/wal-mart-share-repurchases-fall-to-19-6-million-in-quarter/

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