Wal-Mart earnings jump 21%

Healthy economy and groceries contribute to $1.25 billion quarter

August 11, 1999|By BLOOMBERG NEWS

BENTONVILLE, Ark. -- Wal-Mart Stores Inc.'s fiscal second-quarter profit rose 21 percent as the expanding U.S. economy and a push into groceries boosted sales. The world's largest retailer also clamped down on costs.

Net income rose to $1.25 billion, or 28 cents a share, from $1.03 billion, or 23 cents, a year ago, the company said yesterday. Sales in the quarter that ended July 31 rose 15 percent to $38.5 billion from $33.5 billion.

Wal-Mart's low prices, combined with rising wages and high employment, lifted sales of everything from electronics to clothing. Chief Executive Officer David Glass also is getting shoppers to buy more by adding foods such as produce to the discount stores and opening more supercenters, warehouse-size locations with full grocery departments.

"People are willing to put an extra item or two into their shopping carts when they visit," said analyst Bernard Sosnick at JW Genesis Capital Markets, who rates the stock "hold."

"Those items usually have richer profits."

Wal-Mart shares rose $2.6875 to $42.875 yesterday.

The retailer's size helped it keep costs in check by squeezing better terms from vendors. Cost of sales fell to 78.3 percent of revenue from 78.8 percent a year earlier.

"As they get bigger and bigger, that gives them more leverage over their suppliers," said Steve Paspal, senior research analyst at Sovereign Asset Management, a unit of John Hancock Funds, which owned 2.04 million shares as of June.

International sales surged 25 percent to $3.68 billion.

The retailer also said its payroll topped 1 million, boosted by European purchases. It has 220,000 workers abroad and 815,000 in the United States, where it is the largest private employer.

The company operated 1,835 Wal-Mart stores and 453 Sam's Club warehouses in the United States and more than 700 stores outside the country as of July 31.

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