Wal-Mart profit rises 26%, from 36 cents a share to 46 cents

No. 1 retailer was helped by bankruptcy of Kmart

August 14, 2002|By BLOOMBERG NEWS

BENTONVILLE, Ark. - Wal-Mart Stores Inc., the world's largest retailer, said yesterday that its second-quarter earnings rose 26 percent as cost-conscious consumers turned to the discount chain for low-priced goods.

Net income increased to $2.04 billion, or 46 cents a share, from $1.62 billion, or 36 cents, a year earlier, the company said in a statement. Sales rose 13 percent to $59.7 billion in the quarter, which ended July 31.

The retailer faced less competition from bankrupt Kmart Corp. for shoppers watching their budgets, investors said. That helped Wal-Mart sell more items without cutting prices as much this year, they said.

Better inventory control also helped profit margins, Chief Executive Officer H. Lee Scott said during a conference call.

"The consumer is continuing to look for value," said John P. Waterman, who manages about $17 billion in assets for Rittenhouse Financial Services, including about 9.9 million Wal-Mart shares. "Wal-Mart's strategy has worked well in this economic environment."

Wal-Mart Chief Financial Officer Thomas M. Schoewe predicted that Wal-Mart will earn 40 cents to 41 cents a share this quarter, with same-store sales rising 4 percent to 6 percent as consumers cut their spending. Analysts are estimating a profit of 39 cents a share.

Wal-Mart said annual earnings are expected to be $1.76 to $1.78 a share, the same as the retailer forecast last month, when it raised the estimate from $1.74 to $1.76 a share. The average analyst forecast was $1.79.

Sales at stores open at least a year rose 6.4 percent. Gross margin, sales minus the cost of goods sold, increased 30 basis points as a percentage of sales as Wal-Mart sold more-profitable items, Scott said. That helped limit the effects of selling more groceries, which have lower profit margins.

Second-quarter earnings last year were hurt when the retailer reduced prices in response to a failed price-cutting plan by Kmart Corp. that was aimed at attracting more market share.

Kmart filed for bankruptcy protection in January and has closed 283 stores. Wal-Mart has benefited from picking up former Kmart shoppers as the economy improved after last year's recession, analysts have said.

The company had 1,611 Wal-Mart stores, 1,156 super centers, 512 Sam's Club warehouse stores and 34 Neighborhood Market supermarkets at the end of the quarter.

Wal-Mart's shares rose 30 cents yesterday to close at $48.71 on the New York Stock Exchange.

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