Earnings Reports Cheer Many Major Retailers

The outlook for the holiday season brightened Tuesday after major retailers, including Wal-Mart Stores Inc. and J.C. Penney Co., offered bullish comments about consumer spending as they reported solid gains in fiscal third-quarter earnings.

Wal-Mart, the world’s largest retailer, raised its full-year earnings outlook after posting a 13% increase in third-quarter profit that matched Wall Street estimates.

“I believe sales momentum will accelerate into the holidays,” Chief Executive Lee Scott said. “We should have a better Christmas than last year.”

Penney said its profit nearly doubled in the period, beating Wall Street projections. Chief Executive Allen Questrom said that higher oil prices remained a concern but that the company was optimistic that the economy would continue to improve.

Nordstrom Inc., helped by improvements in merchandising and cost controls, reported a 71% earnings increase in the quarter, far exceeding Wall Street projections. The Seattle-based company also raised its earnings outlook.

The big exception was Saks Inc., owner of Saks Fifth Avenue and other department store chains. The Birmingham, Ala.-based retailer blamed hurricanes and a string of planned store closings for its quarterly loss.

After splurging during the first five months of the year, consumers slowed their spending as high gasoline prices and grocery bills and continued job insecurity took a toll. But a rebound in sales starting in October, the last month of the fiscal third quarter for most retailers, gives them more confidence that they will have a strong year-end.

Oil prices, although still high, have come down, and the economy added a net 337,000 jobs in October, the best showing since March and double what had been forecast.

Wal-Mart earned $2.29 billion, or 54 cents a share, for the three months ended Oct. 31, up from $2.03 billion, or 46 cents, a year earlier. Revenue rose about 10% to $69.3 billion, aided by an 18% sales gain in the international division.

Wal-Mart, based in Bentonville, Ark., raised its earnings outlook for the year to $2.39 to $2.41 a share from $2.34 to $2.38 and predicted that it would earn 73 cents to 75 cents in the fourth quarter. Analysts expected earnings of 74 cents a share for the fourth quarter and $2.40 a share for the year.

The company’s shares fell 81 cents to $56.89 on the New York Stock Exchange.

Penney earned $149 million, or 50 cents a share, in the period ended Oct. 30, compared with $80 million, or 27 cents, a year earlier. The 2004 results included charges of $47 million for early debt retirement. Revenue rose 3% to $4.46 billion from $4.33 billion a year earlier.

The company said it expected fourth-quarter sales to slow by low-single digits from last year, citing the calendar, which included an extra week in the final quarter last year. New CEO Myron Ullman starts Dec. 1, replacing Questrom, who is leaving after more than four years at the Plano, Texas-based company.

Penney shares fell 43 cents to $39.98 on the NYSE.