Wal-Mart profit beats estimates

Wal-Mart Stores Inc, the world's largest retailer, said fourth-quarter profit rose more than analysts estimated after it stepped up holiday discounts and added more brands of computers and flat-screen televisions.

Full-year earnings will be at most $3.43 a share, Wal-Mart said, less than analysts' projections.

Net income climbed 4 percent to $4.1 billion, or $1.02 a share, from $3.94 billion, or 95 cents, a year earlier, the Bentonville, Arkansas-based company said. Excluding one-time items, profit beat estimates by 2 cents.

Fourth-quarter sales at stores open at least a year outpaced Target Corp for the first time in three-and-a-half years. Wal- Mart drew customers with an expanded consumer electronics section and more discounts on groceries after previously shifting too far into more-fashionable clothing.

"Nobody gets rich selling groceries, unfortunately, but I do think it's a great way to drive traffic," said Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors in Cincinnati. "In this economic environment, if the consumer's shifting down in terms of the way they're spending their dollars, that benefits Wal- Mart."

Sorrentino helps oversee $12 billion in assets including Wal-Mart shares.

Wal-Mart said it expects to earn between 70 cents and 74 cents a share in the current quarter and between $3.30 and $3.43 for the year that ends in early 2009. Analysts surveyed by Bloomberg projected profit of 74 cents for the quarter and $3.44 for the year.

Wal-Mart declined 53 cents, or 1.1 percent, to $49.44 on Feb 15 in New York Stock Exchange composite trading. The shares increased 4 percent this year before yesterday, compared with an 8.1 percent decrease in the Standard & Poor's 500 index.

Revenue for the three months that ended Jan 31 increased 8.4 percent to $107.4 billion, Wal-Mart said.

Nineteen analysts surveyed by Bloomberg projected average profit, excluding one-time gains or losses, of $1.02 a share.

Consumers have curtailed outlays on extras as they find themselves spending more for food, fuel and housing. Before the holiday season, Wal-Mart made price cuts earlier and on 20 percent more items. Last month, the retailer introduced its own "economic stimulus" package, marking down groceries, medicines, fitness equipment and electronics as much as 30 percent.

Slowing economy

While Wal-Mart has suffered from a slowing US economy because many of its customers live paycheck to paycheck, the retailer has also gained because of the proportion of basic goods it sells and its appeal as a destination for cost-conscious shoppers, said David Abella, an analyst at Rochdale Investment Management in New York with $2.5 billion in assets including Wal-Mart shares.

"They are benefiting from it at the expense of competitors," said Abella. The low-price effort, which is working especially well because of the slowdown, probably helped get some market share back from Target.

Agencies

(China Daily 02/20/2008 page17)