Wal-Mart and Target Post Higher Profits

Wal-Mart Stores Inc. and Target Corp., the two largest U.S. discount retailers, said Thursday that fourth-quarter profit rose as customers bought more winter clothing and holiday gifts.

Net income at Wal-Mart rose 8.5% to $2.72 billion, or 63 cents a share, in the quarter ended Jan. 31, from $2.51 billion, or 57 cents, a year earlier.

Profit at Minneapolis-based Target rose 21%, the most in five quarters.

The company said net income climbed to $832 million, or 91 cents a share, from $688 million, or 75 cents, a year earlier. Analysts had predicted that Target would earn 87 cents a share, according to Thomson First Call.

Lean inventories helped the retailers avoid profit-eroding discounts after the holiday season.

Wal-Mart said fewer clearance sales would help profit rise as much as 17% this year, more than analyst forecasts.

“The inventories are looking real good,” said Ben Friedman, who helps manage about $2 billion at Dana Investment Advisors in Dallas, including Wal-Mart shares. “Retail’s going to have a good first half.”

Cold weather spurred sales of winter coats and hats at Wal-Mart in January. Target gained from demand for digital cameras and toys.

Shares of Wal-Mart rose $1.18 to $58.38 on the New York Stock Exchange. Target fell 58 cents to $41.71, also on the NYSE.

Wal-Mart’s sales increased 12% to $74.5 billion, while sales at stores open at least a year -- a key barometer of a retailer’s health -- rose 4.8%.

Wal-Mart said it expected fewer discounts this year because of rising consumer spending and tighter inventory, helping to widen profit margins and boost earnings.

“I am personally more optimistic about the year we have just started than I have been in several years,” Wal-Mart Chief Executive H. Lee Scott said on a recorded message. “I’m encouraged by consumer spending, particularly driven, I think, by the higher tax refund” and improvements in the job market.

Wal-Mart benefited from Scott’s strategy of adding more profitable private-label clothing brands such as George. Earnings met the 63-cent average forecast of analysts surveyed by Thomson First Call.

The retailer forecast profit of 48 cents to 50 cents a share in the first quarter and $2.34 to $2.38 this year. Analysts had expected profit of 48 cents in the first quarter and $2.32 for the year.

Target Chief Executive Robert Ulrich is trying to maintain the chain’s image as a place for bargains on trendy clothes and goods, such as tea kettles designed by architect Michael Graves.

Sales including revenue from credit cards rose 11% to $15.6 billion. Sales at stores open at least a year rose 4.9%, slowed by a decline at the retailer’s Mervyn’s department store chain and a gain of less than 1% at its Marshall Field’s stores.

Also Thursday, upscale department store chain Nordstrom Inc. reported higher fourth-quarter earnings, beating forecasts thanks to strong holiday sales, better merchandising and cost controls.

The Seattle-based retailer said profit rose 74% to $104.3 million, or 74 cents a share, from $60 million, or 44 cents, a year earlier.

Quarterly sales rose 12% to $1.9 billion, and sales at stores open at least a year rose 8.5%.

Nordstrom shares declined 87 cents to $39.78 on the NYSE.