Wal-Mart Meets 2Q Expectations With Tighter Belt
By Philana Patterson
NEW YORK (Dow Jones)--Wal-Mart Stores Inc.'s (WMT) second-quarter earnings met analysts expectations, in part because the retailer has tightened its belt while continuing to grow, analysts said.
Wal-Mart reported second-quarter net income of $795 million, or 35 cents a share - just what the First Call Inc. consensus had estimated and up 13% from $706 million, or 31 cents, a year earlier.
The company also said the inventory in its domestic retail divisions declined by more than $300 million on an 11% increase in sales to $28.4 billion from $25.6 billion in second quarter 1996.
That inventory decline is significant because Wal-Mart was able to cut its interest expense by $26 million year-over-year, said Alex. Brown analyst Patrick McCormack. By operating with less inventory, he said, "they're tightening their belt as they go."
Wal-Mart's operating margins continue to increase because of sales growth and an easing of competition between the company and discounters Kmart Corp. (KM) and Dayton Hudson Corp.'s (DH) Target division, analysts said.
"They're not beating each other up as much on price," McCormack said.
"(Wal-Mart) is still the price leader, but it's a matter of degree."
Cost of sales for the second quarter was $22.5 billion, or 79.2% of sales, down from $20.3 billion, or 79.5%, a year earlier.
Operating, selling and general administrative costs edged up in the quarter to $4.8 billion, or 16.8% of sales, compared with $4.2 billion, or 16.3%. |
