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Walmart’s 3Q16 International Sales Take $5 Billion Forex Hit

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International headwinds continue to dog Walmart’s results

Walmart (WMT) reported sales of $117.4 billion in fiscal 3Q16, which ended October 31, 2015, for fiscal year ending January 31, 2016. It was a decline of 1.3% year-over-year. Walmart’s revenue missed the market consensus of $118 billion. The adverse impact of forex (foreign exchange) movements reduced the top line by almost $5 billion.

Walmart’s sales actually grew by 2.8% year-over-year in constant currency terms. Walmart’s international sales grew 3.2%, also in constant currency terms. You’ll read a more detailed analysis of Walmart’s international performance in Part 5 of this series.

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Target’s performance

Target (TGT), on the other hand, reported sales of $17.61 billion in fiscal 3Q16, narrowly beating the market consensus of $17.57 billion. Target derived all its revenue from the United States. It exited the Canada market last year, selling 13 stores and one distribution center to Walmart. Target’s sales (excluding Canada) rose 2.1% year-over-year. Let’s look at some peers:

  • Supermarket chain Kroger (KR) reported sales growth of 5.7% in fiscal 2Q16, which ended August 15, 2015.
  • Dollar General (DG) reported sales growth of 7.9% in fiscal 2Q16, which ended July 31, 2015.

Kroger and Dollar General derive all their sales from the US market, like Target.

Canada: A bright spot for Walmart

Target exited Canada, but Walmart’s performance there has been strong. Total sales and store comps (comparables) rose by 5.7% and 4.3%, respectively, in constant currency terms. Higher store traffic (up 1.9%) and increased ticket size (up 2.4%) drove sales. Profitability was also on the upward trend.

Walmart gained market share in Canada in health and wellness, food, infant, and consumables for the 12 weeks through October 29.[1. Source: Nielsen, David Cheesewright, Walmart International CEO (chief executive officer)]

It’s likely that Walmart gained market share in Canada partly due to Target’s exit, with some of Target’s customers transferring to Walmart.

Walmart makes up 1% of the portfolio holdings of the SPDR S&P Retail ETF (XRT) and 2.2% of the holdings of the SPDR Dow Jones Industrial Average ETF (DIA).

Store traffic

Lower prices at the gasoline pump have been instrumental in driving higher store traffic for Walmart, Target, and their competitors in North America. The next article discusses store traffic trends and their drivers.

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