Wal-Mart Net Rose
17% in Quarter,
Fueling Optimism
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By Louise Lee
Staff Reporter of The Wall Street Journal
The Wall Street Journal via Dow Jones
Wal-Mart Stores Inc., boosted by strong post-Christmas sales, reported a 17%
jump in fiscal fourth-quarter profit, topping analysts' estimates and fueling
optimism about its 1998 prospects.
David D. Glass, the Bentonville, Ark., discount retailer's chief executive
officer, said he is "comfortable" with First Call analysts' current earnings
projection of about $1.75 a share for the fiscal year ending in January 1999.
Such results would be an increase of about 12% from earnings of $1.56 a share
for the year earlier.
David Poneman, analyst at Sanford C. Bernstein & Co., is even more optimistic,
estimating that Wal-Mart's 1998 earnings will increase by over 14% on 12% higher
sales. Such advances will be driven largely by expansion of Wal-Mart's
supercenter division and better gross margins, he said.
The most-recent quarter was boosted by strong sales of clearance goods and a
decline in returns after Christmas. "A lot of the things that hurt retailers in
January did not hurt Wal-Mart," said Linda Kristiansen, analyst at Schroder &
Co. "They've got good momentum going into the current year."
In New York Stock Exchange composite trading, Wal-Mart shares rose 68.75 cents
to $46.875.
For the quarter ended Jan. 31, Wal-Mart's net income rose to $1.29 billion, or
57 cents per basic and diluted share, compared with net of $1.1 billion, or 48
cents per basic and diluted share, a year earlier. Analysts had expected 55
cents a share. Sales rose 15% to $35.39 billion from $30.86 billion a year
earlier.
"All the things we've done began to pay dividends this year," said Mr. Glass,
citing the company's recent efforts in building up its supercenter division and
international operations. "We've got tremendous opportunity to continue to
produce these kinds of results."
Future growth overseas will likely come from acquisitions, especially in
Europe, a mature market where "you can't build a chain from the ground up," said
Mr. Glass. Domestically, the company is trying to improve merchandise displays
and tailor goods to individual markets, in addition to continuing to open
stores, he said.
Analysts said they were most impressed with Wal-Mart's tighter inventory
management, which helps the company cut interest expenses and debt. Inventory at
the end of the quarter was down 3% from a year earlier.
Sales at stores open at least a year rose 6.9% from a year earlier. Wal-Mart
said operating profit at its core discount unit rose 14% to $2.15 billion.
Same-store sales at the unit rose 7.1%. At the Sam's division, operating profit
jumped 12% to $307 million, while same-store sales rose 6.1%.
The company's international division posted operating profit of $177 million,
compared with $65 million a year earlier. Those results were largely driven by
double-digit same-store gains in Canada and improvement in Mexico, Wal-Mart
said. |
