Wal-Mart Profit Trails Estimates as Low Prices Hurt Margins

Wal-Mart Profit Trails Estimates as Low Prices Hurt Margins

Wal-Mart Stores Inc., the world’s
largest retailer, reported fourth-quarter profit that trailed
analysts’ estimates as an emphasis on low prices hurt margins.
Net income for the quarter ended Jan. 31 fell 15 percent to
$5.16 billion, or $1.50 a share, from $6.06 billion, or $1.70, a
year earlier, the Bentonville, Arkansas-based retailer said
today in a statement. Excluding some items, profit was $1.44,
trailing the $1.45 average estimate of 24 analysts surveyed by
Bg.
Chief Executive Officer Mike Duke is working to contain
Wal-Mart’s costs and last quarter started pulling the company’s
greeters from store lobbies to help with customer-service tasks.
The retailer is seeking to keep prices low as its low-income
shoppers suffer from persistent unemployment.
“It’s not the most inspiring result, but they’re in a
better place than they were 12 months ago,” Natalie Berg,
global research director for Planet Retail in London, said in an
interview. “Going back to basics is a winning strategy, but it
will take some time.”
Sales at U.S. Wal-Mart stores open at least a year rose 1.5
percent, the second gain in the past 10 quarters. The average
estimate of six analysts was for a 1.8 percent gain.
Total revenue increased 5.9 percent to $123.2 billion.
Gross profit as a portion of sales narrowed to 24.3 percent, a
0.4 percentage point decrease from a year earlier.
Wal-Mart fell 2.9 percent to $60.69 at 8:23 a.m. in New
York. The shares gained 11 percent last year.

Sam’s Club Sales

Comparable-store sales including fuel for the Sam’s Club
warehouse membership unit rose 6.8 percent, topping analysts’
average estimate of 5.5 percent. The company said last month
that Brian Cornell would step down as the unit’s CEO and be
replaced by Rosalind Brewer, who most recently was president of
Wal-Mart’s U.S. East business.
Sales at the company’s international operations rose 13
percent to $35.5 billion. Operating income for the unit
increased 15 percent to $2.31 billion.
Wal-Mart said yesterday it increased its holding in closely
held online supermarket Yihaodian to tap rising consumer wealth
in China. The company, now 51 percent owned by Wal-Mart, will
use the funds to expand its offerings and open more warehouses
and delivery stations.