Wal-Mart, Target Profits Beat Expectations

Wal-Mart Stores Inc. and discount rival Target Corp. posted fiscal fourth-quarter earnings Thursday that beat Wall Street expectations, suggesting that the profit-sapping effect of holiday discounting was less than some analysts feared.

Wal-Mart said its profit rose 16.2% for the November-January period, beating Wall Street forecasts by a penny a share. Its earnings for the full year topped $10 billion for the first time.

Meanwhile, Target’s quarterly profit inched up only 0.2% but still beat analyst expectations by a penny a share and capped a year when earnings soared almost 77%. Target, which has sharpened its merchandise offerings with designer names such as Isaac Mizrahi and hot gadgets such as iPod music players, also continues to outpace Wal-Mart in sales growth at stores open at least a year.

Lee Scott, Wal-Mart’s president and chief executive, acknowledged that the company made some mistakes. But he did offer a bullish outlook for 2005 based on an expectation that the economy would continue to improve.

Wal-Mart, based in Bentonville, Ark., earned $3.2 billion, or 75 cents a share, for the three months ended Jan. 31, up from $2.7 billion, or 63 cents, a year earlier. Wal-Mart’s revenue rose 10.4% to $83 billion.

The latest earnings results beat expectations of 74 cents a share by analysts surveyed by Thomson First Call.

During the quarter, the company struggled with its early holiday sales and changed its advertising strategy after post-Thanksgiving sales numbers were flat. Sales picked up after Wal-Mart cut prices on some select popular products and began advertising specific bargains, a shift from its emphasis on the overall shopping experience.

“We were not aggressive enough in our merchandising plan,” Scott said. “We would have been better off if we had traded lower markdowns for sales.”

For the year, Wal-Mart earned $10.3 billion, or $2.41 a share, up from $9.1 billion, or $2.07, a year earlier. The company had sales of $288.2 billion for the year, up from $258.7 billion a year earlier.

Sales at U.S. Wal-Mart stores open at least a year rose 1.5% in the quarter and 3.3% for the fiscal year. That was at the low end of the company’s early projection of gains of 3% to 5%.

Target, based in Minneapolis, earned $825 million, or 91 cents a share, in the three months ended Jan. 29, up from $823 million, or 90 cents, a year earlier. Excluding results from the Marshall Field’s and Mervyn’s department store chains that Target sold last year, earnings rose 12%.

Without the tax benefits of the department store sales, Target said it earned 90 cents a share -- a penny ahead of the consensus of analysts surveyed by Thomson First Call.

Revenue rose 11.1% to $15.2 billion. Same-store sales rose 5.4%.

For the full year, Target earned $3.2 billion, or $3.51 a share, up from $1.8 billion, or $1.97, a year earlier. Revenue rose 11.5% to $46.8 billion.

Wal-Mart’s shares rose 10 cents to $52.70 on the New York Stock Exchange, where Target’s shares rose $1.09 to $50.16.