Wal-Mart beats slump with higher quarterly profit, projects weaker Q4
13 Nov 2008
Wal-Mart Stores has reported third-quarter profit that topped analysts' estimates but said a stronger dollar would squeeze its full-year profit, even as the world's largest retailer said it was ''optimistic'' about the upcoming holiday shopping season.
Walmart expects Christmas boost to sales despite the declining trend in US consumer spending and the worst recession in at least three decades, a situation which has already led to the country's No2 electronics dealer Circuit City filing bankruptcy.
Bentonville, Arkansas-based Wal-Mart posted operating income of $3.03 billion, or 77 cents a share, up from $2.85 billion, or 70 cents a share, a year earlier. Including a gain from discontinued operations, net income in the latest quarter was $3.14 billion, or 80 cents a share, up from $2.86 billion, or 70 cents, in the prior year. Revenue rose 7 per cent to $97.63 billion from $90.82 billion. Analysts had expected profit of 76 cents on sales of $98.42 billion.
Fourth-quarter earnings will be $1.03 to $1.07 a share, trailing analysts' estimates of $1.11, with currency effects eroding profit by 6 cents, Wal-Mart said. Sales at stores open at least for a year may rise by 1 to 3 per cent. Full-year profit will increase to $3.42 to $3.46 a share from $3.16 a year earlier, Wal-Mart said. It had projected $3.43 to $3.50 against analysts estimate of $3.48 a share.
While the ongoing slump in consumer spending has deflated sales at most retailers, Wal-Mart continues to benefit as more budget-conscious Americans trade down in their everyday purchases.
The figures show that Wal-Mart CEO Lee Scott's strategy to emphasise lower prices is working, enabling Wal-Mart to win customers from Target Corp and Macy's Inc as shoppers curb spending. Investors have rewarded Wal-Mart with an 11 per cent increase this year, the only one of 30 companies in the Dow Jones Industrial Average to rise.
"We are very pleased with our results this quarter," said Scott. "Despite economic difficulties around the world, we achieved solid sales and earnings growth and we are optimistic about the upcoming holidays."
The November-December holiday shopping months are critical to retailers because the period can account for as much as 50 per cent of merchants' annual profit and sales. Wal-Mart's has been especially aggressive this year with its holiday campaigns. The retailer last week announced it would be chopping prices on thousands of items over the next 7 weeks. And for the first time, Wal-Mart will introduce a holiday gift section in its stores, executives revealed last month.
