Bloomberg News

Wal-Mart Profit Trails Estimates as Low Prices Hurt Margins

February 22, 2012

(Updates with analyst’s comment in fourth paragraph.)

Feb. 21 (Bloomberg) -- Wal-Mart Stores Inc., the world’s largest retailer, reported fourth-quarter profit that trailed analysts’ estimates as an emphasis on low prices hurt margins.

Net income for the quarter ended Jan. 31 fell 15 percent to $5.16 billion, or $1.50 a share, from $6.06 billion, or $1.70, a year earlier, the Bentonville, Arkansas-based retailer said today in a statement. Excluding some items, profit was $1.44, trailing the $1.45 average estimate of 24 analysts surveyed by Bloomberg.

Chief Executive Officer Mike Duke is working to contain Wal-Mart’s costs and last quarter started pulling the company’s greeters from store lobbies to help with customer-service tasks. The retailer is seeking to keep prices low as its low-income shoppers suffer from persistent unemployment.

“It’s not the most inspiring result, but they’re in a better place than they were 12 months ago,” Natalie Berg, global research director for Planet Retail in London, said in an interview. “Going back to basics is a winning strategy, but it will take some time.”

Sales at U.S. Wal-Mart stores open at least a year rose 1.5 percent, the second gain in the past 10 quarters. The average estimate of six analysts was for a 1.8 percent gain.

Total revenue increased 5.9 percent to $123.2 billion. Gross profit as a portion of sales narrowed to 24.3 percent, a 0.4 percentage point decrease from a year earlier.

Wal-Mart fell 2.9 percent to $60.69 at 8:23 a.m. in New York. The shares gained 11 percent last year.

Sam’s Club Sales

Comparable-store sales including fuel for the Sam’s Club warehouse membership unit rose 6.8 percent, topping analysts’ average estimate of 5.5 percent. The company said last month that Brian Cornell would step down as the unit’s CEO and be replaced by Rosalind Brewer, who most recently was president of Wal-Mart’s U.S. East business.

Sales at the company’s international operations rose 13 percent to $35.5 billion. Operating income for the unit increased 15 percent to $2.31 billion.

Wal-Mart said yesterday it increased its holding in closely held online supermarket Yihaodian to tap rising consumer wealth in China. The company, now 51 percent owned by Wal-Mart, will use the funds to expand its offerings and open more warehouses and delivery stations.

--Editors: Kevin Orland, James Callan

To contact the reporter on this story: David Welch in Detroit at dwelch12@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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