Wal-Mart posts strong quarterly profit but issues a cautionary note
Retail giant Wal-Mart Stores Inc. on Thursday reported a 22% increase in profit for the fourth quarter but said an important measure of sales fell and cautioned that it expected a challenging start to the year for its U.S. business.
For the quarter ended Jan. 31, the world’s largest retailer said profit was $4.63 billion, up from $3.79 billion in the year-earlier quarter. Total sales for the quarter rose 4.6% to $112.83 billion.
But sales at U.S. stores open at least a year -- known as same-store sales and considered an important measure of a retailer’s health because it excludes the effect of store openings and closings -- missed expectations by declining 1.6%. The retailer said its results were hurt by falling prices for groceries and electronics.
“It was a mixed bag,” said Wayne Hood, an analyst at BMO Capital Markets. “People were disappointed obviously with the [same-store] sales being down.”
Calling the retailer’s tepid first-quarter outlook “uninspiring,” Hood said Wal-Mart’s results showed the continued strain on consumers as they contend with tough economic conditions.
Wal-Mart serves “more consumers that are under economic pressure than most other retailers, and that’s reflected in their comp-store sales,” Hood said.
“Some discretionary categories continue to struggle, and that’s symptomatic of where their customer is right now.”
Shares of Wal-Mart fell 59 cents, or 1.1%, to $53.47.
The Bentonville, Ark., retailer, which has been one of the recession’s few retail winners, also reported its full-year results. Profit increased 7%, to $14.34 billion from $13.4 billion a year earlier, and total sales increased 1%, to $405.05 billion from $401.09 billion.
Same-store sales in the U.S. were flat for the year, the company said.
Wal-Mart’s financial reports are closely watched by analysts and other industry professionals, who consider the company a barometer of retail health.
Wal-Mart Chief Executive Mike Duke said the retailer’s results benefited from cost-cutting measures and more-efficient operations.
“These results reflect the ongoing underlying strength of our business,” he said.
Duke added that although the company expected strong growth from its international business this year, its domestic business was expected to be more troublesome.
“U.S. sales will be more challenging in the first quarter as Wal-Mart U.S. cycles through strong year-over-year comparisons and deflation,” he said. “We remain focused on growing top-line sales and expect improvement in the United States as the year progresses.”
