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Wal-Mart profit up; CEO bullish for 2004

Wal-Mart Stores Inc. on Thursday said quarterly profit rose 11 percent and it forecast better-than-expected earnings for this year, as bigger tax refunds and a rebounding U.S. economy drive consumer spending.
/ Source: Reuters

Wal-Mart Stores Inc. on Thursday said quarterly profit rose 11 percent and it forecast better-than-expected earnings for this year, as bigger tax refunds and a rebounding U.S. economy drive consumer spending.

“I am personally more optimistic about the year we have just started than I have been in several years,” Wal-Mart Chief Executive Lee Scott said on a recorded message.

For the the fourth quarter ended Jan. 31, the world’s biggest company by revenue said earnings rose to $2.7 billion, or 63 cents per share, from $2.5 billion, or 56 cents per share, a year earlier.

Analysts, on average, expected Wal-Mart to earn 63 cents, according to Reuters Research, a unit of Reuters Group Plc. The retailer’s earnings would have topped the high end of its 63 cents to 65 cents per share forecast if not for a German tax law change that trimmed its profit.

Bentonville, Arkansas-based Wal-Mart said quarterly sales rose 12 percent to $74.5 billion. That topped a Wall Street estimate of $74.25 billion, according to Reuters Research.

The retailer reported moderate sales growth for the vital Thanksgiving-to-Christmas holiday season, but demand improved in January as a blast of cold weather across much of the United States sent shoppers out in search of coats and hats.

“January was an excellent month for Wal-Mart, both in terms of sales and profitability,” Scott said, adding that the strong start to the calendar year gave him more confidence for 2004.

Last year, a sluggish holiday shopping season left Wal-Mart with heavy stockpiles of apparel, which it discounted heavily. This year, Scott said the company was starting out with a much cleaner inventory, putting it in good shape for the spring.

Looking ahead, the company said earnings for this year should range from $2.34 to $2.38 per share, exceeding the Reuters Research mean estimate of $2.33. For the first quarter, earnings should range from 48 cents to 50 cents per share, compared with an average estimate among analysts of 48 cents.

International unit shines
Wal-Mart had said January sales were strong enough to push its earnings up to the high end of expectations, but the new German tax rules trimmed $150 million, or 3 cents per share, off of its results.

With the exception of Germany, where it has not been profitable, Wal-Mart’s international unit has been a big winner. In the latest quarter, that division recorded operating profit growth of 15.2 percent, compared with a more modest 8.3 percent gain at the larger U.S. Wal-Mart Stores unit.

At Sam’s Club warehouse stores, in the midst of a turnaround under new management that is focusing on small business customers, operating profit jumped 17.1 percent.

In a brutally competitive holiday season that led to two toy retailers filing for bankruptcy, Wal-Mart said its toy sales were profitable, and gross margin was better than it had been during the first three quarters.

Scott said overall gross margin was better than expected throughout the company, and credited a more profitable selection of merchandise.

Analysts have said Wal-Mart has become more selective about which prices it cuts in an effort to shore up profitability, but Scott insisted that the retailer -- which lives by the mantra “Always Low Prices” -- had no plans to increase prices.

“We are not raising prices and have no intention of doing so,” he said. “We do think there are opportunities for us to be more profitable. We would expect gross margin next year would continue to improve.”