Thread: Wal-Mart's 4Q profit rises; U.S. sales still limp

Wal-Mart's 4Q profit rises; U.S. sales still limp

By Anne D'Innocenzio

NEW YORK — Wal-Mart Stores (WMT) reported a 27% increase in fourth-quarter net income as the world's largest retailer benefited from cost-cutting and strong sales overseas.

In an a attempt to better manage inventory, Wal-mart plans to use electronic identification tags on merchandise.

But a key revenue measure in the company's U.S. business fell for the seventh quarter in a row and came in worse than Wal-Mart's own projection, raising doubts the company can turn around its U.S. business this year.

Wal-Mart posted net income of $6.06 billion, or $1.70 per share, in the quarter ended Jan. 31. That compares with $4.76 billion, or $1.25 per share, a year earlier.

Revenue rose 2.4% to $116.3 billion. Net sales, excluding membership and other income, increased 2.5% to $115.6 billion.

But revenue at stores open at least a year fell 1.1%, dragged down by a 1.8% drop at the namesake discount stores, which account for more than 60% of its business. Analysts had expected a 0.8% increase, according to FactSet, but worries on Wall Street mounted in recent days after reports of a weak holiday season.

Analysts expected earnings of $1.31 per share on net sales of $117.52 billion.

Read more on WMT at "Some of the pricing and merchandising issues in Wal-Mart ran deeper than we initially expected, and they require a response that will take time to see results," said CEO and President Mike Duke.

Wal-Mart executives told investors in November that the holiday quarter would mark the end of the streak in declining revenue, counting on a number of steps in recent months to reverse mistakes in pricing and merchandising.

Over the past year, the company scrambled to add back thousands of products it had culled as part of a renovation of its stores. In recent months, it went back to emphasizing low prices across the store. But Wal-Mart's disappointing holiday report shows that those changes are taking time to lure back shoppers who defected to rivals.

Wal-Mart's funk contrasts to where it was at the beginning of the recession in late 2007. Unlike most stores, Wal-Mart thrived. Its core customers — households making less than $70,000 a year — bought more. Affluent shoppers became price-conscious and discovered Wal-Mart's prices were hard to beat.

Shoppers also liked that Wal-Mart's stores looked neater. The company was finishing a major renovation to address complaints that its stores were messy. But that renovation started to backfire in 2009. As part of the renovation, it had removed thousands of products from stores. Shoppers went elsewhere to find their favorite brands.

Another big mistake was pricing. Last year, the company strayed from its "everyday low prices" slogan, the bedrock philosophy of founder Sam Walton. Instead, the company slashed prices only on select products, and the deals were temporary. That confused shoppers, and gave them less confidence that they would find the cheapest prices.

Meanwhile, Wal-Mart has been squeezed by increasing competition from dollar stores, grocery chains and Target, which last October began giving customers who pay with its branded credit or debit card a 5% discount.

Dollar stores are winning over customers with convenience, and Wal-Mart is fighting back by working with suppliers to come up with smaller packages. Wal-Mart also plans to open smaller stores in urban markets, but analysts say that Wal-Mart is moving too slow on these initiatives.

Wal-Mart's profits and its international business remained a bright spot. The company said that Wal-Mart's international business remains its growth engine and it expects growth in emerging markets to speed up.

For the fourth quarter, international sales rose almost 9%, while at Walmart's U.S. business, they slipped 0.5%, second quarterly decline in a row. At Sam's Club, revenue increased 4.4%.

Wal-Mart expects first-quarter earnings per share between 91 and 96 cents. Analysts expected 96 cents per share, according to FactSet. The company also forecast that earnings for the year would be between $4.35 and $4.50 per share. Analysts expect $3.67 per share.

http://www.usatoday.com/money/companies ... mart_N.htm

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