Wal-Mart's results beat forecasts

But same-store sales gain is record low

February 21, 2007|By Abigail Goldman | Abigail Goldman,Los Angeles Times

Wal-Mart Stores Inc. ended one of its toughest years in more than a decade yesterday with a better-than-expected profit for the holiday quarter and a fairly upbeat forecast for this year.

Even so, it finished the year with only a slight gain at stores open at least a year, 2.1 percent. That key measure of retail performance was the company's slowest since it began recording same-store sales increases in 1980.

Investors, however, were buoyed by the news.

"I would not be surprised if they're at a low point," said Victor Hawley, portfolio manager at Reed, Conner & Birdwell of Los Angeles, which holds about 850,000 shares in Wal-Mart worth about $42 million.

"The stars may be aligned for something better than we've seen - not this month, but over the next quarter or two."

The world's largest retailer said its net income for the fiscal fourth quarter, which ended Jan. 31, rose 9.7 percent, to $3.94 billion. Revenue rose 11 percent to $99 billion, up from $89 billion.

Sales at Wal-Mart stores open at least a year grew 1.9 percent in the quarter, a pace analysts said reflected the chain's struggles to compete against Target Corp. and others. Same-store sales at Wal-Mart's Sam's Club warehouse stores grew 2.9 percent.

Wal-Mart said it expects same-store sales to grow 1 percent to 3 percent in its fiscal first quarter. It forecast earnings this year to gain roughly 8 percent to 10 percent, or $3.15 to $3.23 a share.

For the full year ending Jan. 31, Wal-Mart reported net income of $11.28 billion, or $2.71 a share, up less than 1 percent from a year earlier. The year's numbers reflect a charge of $894 million associated with discontinuing operations in Germany and South Korea.

The company said price cuts on popular items such as electronics and toys helped drive its fourth-quarter sales, and tight inventory controls helped reduce markdowns.

Wal-Mart has struggled to boost sales for much of the past 18 months.

At the same time, its image has been bruised in battles with labor unions and other activists who have railed against the company's pay, benefits and impact on local communities.

Wal-Mart has blamed sales woes on a disruptive store remodeling program and mistakes in apparel and home furnishings, which tend to be higher-margin items for discount retailers who compete vigorously on basic goods.

Wal-Mart's shares rose $1.78 yesterday to close at $50.26.

Abigail Goldman writes for the Los Angeles Times.

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