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story.lead_photo.caption In this Sept. 3, 2019 file photo, a Walmart logo is displayed outside of a Walmart store, in Walpole, Mass.

Walmart Inc. raised its guidance for the fiscal year Thursday in reporting third-quarter earnings that surpassed analysts' expectations.

The Bentonville retailer reported net income of $3.29 billion, or $1.15 per share, for the quarter that ended Oct. 31, compared with $1.71 billion, or 58 cents per share, a year ago. The average earnings estimate from 28 analysts surveyed by Thomson Reuters was $1.09 per share.

Revenue rose 2.5% to $128 billion, including membership fees and other income.

The company said in a news release that it now expects adjusted earnings per share for the current fiscal year to increase slightly compared with the previous year when including its Indian subsidiary Flipkart's performance. Excluding Flipkart, adjusted earnings per share could rise "by a high single-digit percentage range," the retailer said.

Walmart released the earnings report before the stock market opened. Walmart's shares, which reached a record high of $125.38 in early trading Thursday on the New York Stock Exchange, closed at $120.65, down 33 cents, or 0.27%. The stock has traded as low as $85.78 in the past year.

Brian Yarbrough, a retail analyst with Edward Jones, said the reason Walmart's share price fell during the day was because it was initially "priced for perfection."

"As people have digested the news, they're feeling like, 'It was a good quarter, but the stock was priced for a great quarter,'" Yarbrough said. Walmart's leaders "are doing a fine job," he added. "It's just the stock has had a huge run and it sells at a premium multiple valuation."

Yarbrough also noted that the near-doubling of net income resulted from a one-time charge in last year's third quarter. Analysts factor that out, he said, which would leave Walmart with an increase in third quarter profit of around 4%.

In prepared commentary accompanying the earnings report, Brett Biggs, Walmart's chief financial officer, said the U.S. division marked a sixth-straight quarter of growth, with operating income up 6.1%. In the international unit, he said, "operating income declined primarily due to the expected dilution from Flipkart, while Sam's Club was pressured by accelerated strategic price and technology investments."

Biggs also said the retailer returned $2.6 billion to shareholders during the quarter through dividends and share repurchases. Share buyback activity was lower in the third quarter than in recent quarters and last year, he said.

The quarter was an eventful one for the retailer, beginning with the Aug. 3 shooting in El Paso, Texas, that killed 22 people. The store at which the tragedy occurred reopened Thursday morning.

John Furner, the new president and chief executive of Walmart's U.S. division, said in a conference call with reporters that the store's employees were ready to return to work. "The store looks fantastic, and they're ready to take care of their customers," he said.

Furner, who formerly led Walmart's Sam's Club division, took over Greg Foran's role on Nov. 1. He expressed appreciation for Foran's leadership and said he looks forward to building on Foran's success. His priorities in his new post, he said, are to stay focused on Walmart customers and employees, "and land all the plans we've got from now through the end of the year."

Walmart's U.S. division -- the company's largest -- reported net sales of $83.2 billion, up 3.2%. Sales at stores open at least a year, considered a key indicator of a retailer's health, also rose 3.2%. At the start of the current fiscal year, Walmart began including online sales as a component of same-store sales.

Walmart U.S. e-commerce sales climbed 41%, helped by strong growth in its online grocery business. The company began offering a grocery delivery membership option in the quarter, available at 1,400 of its U.S. stores. It also started an in-home delivery service in three U.S. cities for a combined reach of more than 1 million people.

Carol Spieckerman, a retail consultant and president of Spieckerman Retail, said the positive same-store sales performance "attests to Walmart's impressive ability to drive greater productivity out of a mature brick-and-mortar business."

In addition, "Walmart's e-commerce business is well-developed at this point, so the double-digit growth there is really something to crow about," Spieckerman said. "Overall, Walmart's performance paints a rosy picture that hopefully won't fade as trade uncertainties potentially take hold in the months ahead."

Net sales for Walmart International grew 1.3%, to $29.17 billion. Adjusted for fluctuations in currency exchange rates, however, net sales rose 4.8%, to $30.18 billion.

Seven of the international division's 10 markets posted positive same-store sales, led by China and Mexico. In Biggs' prepared remarks, he said China had its best sales results in more than five years, with net sales up 6.3% and same-store, or comp, sales up 3.7%.

Much of China's sales growth came from Sam's Club, which delivered a double-digit increase in comparable sales, and a whopping 99% spike in online sales. Spieckerman called the latter achievement "remarkable given the dominance of Alibaba-owned platforms" in that country.

Biggs said comparable sales in Mexico rose 3.8%, "which was better than the overall market for the 19th consecutive quarter." E-commerce adoption is growing rapidly in Mexico, he said, with 65% year-over-year growth in the third quarter. "There's plenty of runway left for growth in Mexico," Biggs said.

And at Sam's Club, Walmart's members-only warehouse division, net sales, including fuel, rose just 0.7% to $14.6 billion. Same-store sales, excluding fuel, slipped 0.6%. Sam's Club saw its online sales grow 32%.

"We're pleased with the membership trends we're seeing at Sam's as member counts and renewal rates increased, including Plus membership," Biggs said. He noted that membership income rose 3.1% in the quarter, the highest growth in more than three years.

Graphs showing Walmart Inc. third quarter information.

Business on 11/15/2019

Print Headline: Walmart 3Q profit surges to $3.29B

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