Wal-Mart Posts 28% Profit Rise, but Sales Slow
Wal-Mart Stores Inc., the world’s largest retailer, said Wednesday its fiscal second-quarter earnings rose 28%, in line with Wall Street’s expectations, and revenue grew 20% despite sluggish sales in much of the retail sector in the last few weeks.
Wal-Mart shares tumbled 7%, however, on fears that the company does not have a course of action to deal with the spending slowdown. Shares closed off $4 at $53.63 on the New York Stock Exchange, despite the company’s assurances it is poised for record growth.
Wal-Mart said net income grew to $1.6 billion, or 36 cents a share, for the period ended July 31, as sales jumped 20% to $46.11 billion.
“The second quarter was a good quarter, but not a great quarter,” Chief Executive Lee Scott said in a conference call.
The Bentonville, Ark.-based company said customer traffic slowed toward the end of the second quarter, but it sees the slowing as only a slight pause by consumers.
“We do not anticipate a slowdown in consumer spending and remain confident that we will report record sales and earnings for the year,” Scott said.
“The apparent consumer spending slowdown has affected all retailers, but Wal-Mart has been able to adjust their expense levels and adjust their inventory levels as good as any other retailer or maybe better,” said Bill Dreher, a retail industry analyst with Robertson Stephens.
The company said operating profit rose 17% at its Wal-Mart stores segment, including its Supercenters, which also sell groceries. Profit at the Sam’s Club “members-only” warehouse segment rose 12% to $240 million.
The company also said total inventory for the quarter rose 12.2%, and although that level is still significantly below sales growth, it said it has plans to remove $1 billion from total inventory levels by the end of the current year.
At a Glance
Other earnings, excluding one-time gains or charges unless noted, include:
* Federated Department Stores Inc. said its fiscal second-quarter profit fell 54% to $63 million, or 30 cents a share, hurt by late credit card payments at the Fingerhut catalog business acquired by the retailer last year. Sales at the owner of Macy’s, Bloomingdale’s and other chains rose 1.5% to $4.07 billion. Federated said last month that credit card delinquencies among Fingerhut customers, who tend to have lower incomes than the company’s typical department-store shopper, were rising. With that warning, analysts lowered their earnings estimates from 65 cents to 26 cents. Federated said that excluding the incremental Fingerhut bad-debt problem, earnings would have been 74 cents.
* MetLife Inc., the No. 1 U.S. life insurer by assets, said its second-quarter earnings rose 18% to $374 million, or 48 cents a share, as cost cutting and strong life insurance sales offset losses in auto and home insurance. The New York life insurer, which converted to a stock company in April, said revenue jumped 30% to $8.2 billion. The results were in line with analyst estimates, according to a First Call/Thomson Financial poll. Strong sales of life insurance helped to offset weakness in home and auto insurance businesses caused in part by storm losses.
* Payless ShoeSource Inc. said its fiscal second-quarter profit fell 4.8% to $48.8 million, or $2.16 cents a share, as the shoe retailer paid higher interest on debt related to its most recent repurchase of shares. The earnings beat analyst expectations by a penny. Sales rose 6.4% to $816.9 million, while sales at stores open a year or more gained 2.6%.
* Polo Ralph Lauren Corp. said profit from operations fell 15% to $24 million, or 25 cents a share, in its fiscal first quarter, as store openings and the acquisition of its European licensing business increased costs. The maker of Ralph Lauren, Chaps and Polo Sport clothing, said revenue rose 12% to $487.4 million. The earnings were a penny higher than analysts expected.
