Major Retailers Post Mixed Results

Wal-Mart Stores Inc. said Tuesday that its fiscal fourth-quarter profit rose by the smallest amount in almost five years, and Home Depot Inc. said earnings fell as the slowing U.S. economy prompted consumers to cut back on spending.

Net income at Wal-Mart, the world’s biggest retailer, rose 4.5%, the slowest pace since the first quarter of 1996. Home Depot, the No. 1 home improvement chain, said net income dropped 20%, its first decline in 15 years.

But both companies said they expect to meet earnings forecasts for the first quarter--sending their stocks higher.

The U.S. economy last quarter grew at the slowest annualized pace in more than five years as higher fuel prices and stock market losses crimped spending.

But “we do not see any indication that spending will slow further from its current levels,” said Wal-Mart Chief Executive H. Lee Scott. He said last month’s Federal Reserve interest rate cuts and a potential tax cut will revive spending in the second half.

Wal-Mart and Home Depot were among the biggest gainers in the Dow Jones industrial average Tuesday. Wal-Mart rose $1.04, or 2%, to close at $53.40, and Home Depot gained $1.09, or 2.5%, to close at $44.09 on the New York Stock Exchange.

Other retail stocks also rose, even as technology stocks were hammered. Target rose $1.53 to $37.25, Kohl’s gained $2.21 to $71.82 and Sears added $1.12 to $40.25.

“You’d rather own retail today, which has some positive catalysts, than a sector that’s being beaten down every day,” said portfolio manager Angela Auchey at Federated Investors, which held 3.1 million Wal-Mart shares and 2.7 million Home Depot shares as of December.

Wal-Mart’s earnings rose to $2 billion, or 45 cents a share, for the quarter ended Jan. 31, from $1.92 billion, or 43 cents, a year earlier. The results beat by one penny the average estimate of analysts polled by First Call/Thomson Financial. Sales at the Bentonville, Ark.-based retailer rose 10% to $56.6 billion.

Wal-Mart’s supercenters, warehouse-size stores with complete grocery departments, drove fourth-quarter results. Selling food helps protect the company from weakening demand for other goods. It also draws shoppers more often, increasing the likelihood that they will purchase other items while at the store. Wal-Mart’s food sales grew 32%.

Home Depot’s earnings fell to $465 million, or 20 cents a share, from $578 million, or 25 cents. Sales in the period ended Jan. 28 rose 14% to $10.46 billion. Same-store sales were little changed.

The Atlanta-based company had reduced fourth-quarter profit estimates twice since October because of falling prices for building materials. Fourth-quarter earnings met the reduced forecast of analysts polled by First Call.

The last time Home Depot’s profit fell was in the fourth quarter of 1985, a company spokesman said.

Abercrombie & Fitch Co. said its fiscal fourth-quarter net income rose 1% to $77.2 million, or 76 cents a share, from $76.7 million, or 73 cents, a year ago, but topped analysts’ expectations by two cents.

The retailer of youth-oriented apparel said sales rose 21% to $439.4 million.

Abercrombie shares fell $2.44 to $27.90 on the NYSE.