Wal-Mart Stores Inc. (WMT – Analyst Report) started fiscal 2017 on a positive note with both earnings and revenues beating the Zacks Consensus Estimate. Revenues also increased owing to improved comps but earnings declined year over year. Unfavorable currency and higher investments in wages and e-commerce activities took a toll on the company’s results. Shares fell more than 5% in pre-market trading.

Wal-Mart’s fiscal first quarter 2017 earnings of 98 cents per share beat the Zacks Consensus Estimate of 88 cents by 11.4% and exceeded management’s guided range of 80 to 95 cents per share. However, it declined 4.9% from the year-ago earnings from continuing operations of $1.03 per share. Though the company reported higher sales at Wal-Mart U.S. and Sam’s Club, a decline in sales at the international business resulted in the year-over-year decline in earnings. Currency headwinds and a decline in operating income also resulted in the decline.

Wal-Mart Stores, Inc. – Earnings Surprise | FindTheBest

Quarter in Detail

Total revenue of the retailer was $115.9 billion (including membership and other income). Revenues beat the Zacks Consensus Estimate of $112.7 billion by 2.8% and increased 0.9% year over year. Currency depleted sales by approximately $3.5 billion. The decline in the International business was more than offset by growth in sales at Wal-Mart U.S. and Sam’s Club divisions.

On a constant currency basis, revenues increased 4% to $119.4 billion. E-commerce sales increased approximately 7% globally on a constant currency basis. However, e-commerce growth was weaker than the preceding quarter’s growth of 8% due to a challenging scenario in key international markets.

Total revenue comprised net sales of $114.9 billion (up 0.9% from the year-ago quarter and 3.9% on a constant currency basis) and membership and other income of $918 million (up 11.4% year over year).

Operating income declined 7.1% to $5.28 billion in the first quarter. On a constant currency basis, operating income declined 4.6%, as the company continued to invest in people and technology. Besides currency, higher investment in e-commerce initiatives in order to compete with online retailer Amazon.com, Inc. (AMZN – Analyst Report) and in associates through higher wages and training seem to have dampened operating income.