Wal-Mart's profit rises, Penney's declines Retailers' 3rd quarters come in as projected

Earnings

November 12, 1997|By BLOOMBERG NEWS

NEW YORK -- Wal-Mart Stores Inc. and J. C. Penney Co. met fiscal third-quarter earnings expectations on tighter cost and inventory controls amid stiff competition.

Wal-Mart's net income rose to $792 million, or 35 cents a share, from $684 million, or 30 cents, a year ago. J. C. Penney's profit from operations fell to $229 million, or 85 cents a fully diluted share, from $257 million, or $1.03.

Both chains trimmed inventory 4 percent and 3 percent, respectively, reducing their costs for storing goods and marking down old products.

"Wal-Mart is a quality company that will give you consistent earnings over the next several years," said Steve Paspal of the Sovereign Asset Management unit of John Hancock Funds, which held 1.83 million Wal-Mart shares June 30. "That consistency is worth a premium."

Wal-Mart's earnings for the quarter ended Oct. 31 increased 16 percent, boosted by higher sales at its namesake chain, supercenters and Sam's Club discount stores. Sales were helped by Halloween candy, costumes and decorations. The results beat by a penny a share the average estimate of 26 analysts surveyed by First Call Corp.

Sales at its Wal-Mart stores rose 12 percent to $20.5 billion while Sam's Club's revenue rose a better-than-expected 3 percent to $5.06 billion. That helped boost total revenue 12 percent to $29.12 billion from $26.08 billion, the company said.

Wal-Mart said its international business showed a 46 percent increase in sales to $1.78 billion.

J. C. Penney's earnings fell 16 percent before charges, and matched the average per-share estimate of 21 analysts surveyed by First Call Corp. Both quarters exclude charges.

The results got a boost from a 7.2 percent same-stores sales increase at its Eckerd drugstore chain, which it bought in February for $3.1 billion. Higher sales at Eckerd boosted total revenue by nearly 30 percent to $7.44 billion for the period ended Oct. 25.

Same-store sales, or sales at stores open at least a year, fell 2.5 percent at its J. C. Penney department stores and catalogs. That division suffered from lower apparel sales, particularly in September when warm weather hurt sales of sweaters and other winter clothing.

Still, the company managed to partially offset the weak sales at its namesake stores by controlling costs. Inventory levels, for one, declined about 3 percent during the quarter, said Chief Financial Officer Donald McKay.

In its third quarter, J. C. Penney also offered 1,575 managers an early retirement package and 1,250 accepted. That's expected to result in annual savings of $85 million to $90 million.

Pub Date: 11/12/97

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