Fin24

Price cuts boost Walmart US in Q4

2012-02-21 16:22

Chicago - Walmart Stores fourth-quarter profit came in just short of Wall Street's expectations, sending shares down 2.6% as it cut prices to win over US shoppers during the holiday season.

Walmart US, the biggest division of the world's largest retailer, has been lowering prices, bringing back a wider variety of items and focusing on a low price message to woo shoppers on limited budgets who started to shop at dollar stores and elsewhere in recent years. Traffic at those stores rose after six quarterly declines.

Walmart US posted a 1.5% increase in sales at stores open at least a year. It was the second quarter in a row that Walmart US same-store sales rose after nine consecutive quarterly declines.

However, operating income growth at Walmart US grew at a slower rate than sales. Gross profit margin declined as the company made investments in its pricing strategy.

The rise in sales was also not as strong as analysts expected. Wal-Mart expected Walmart US same-store sales would be flat to up 2%, compared with a 1.8% drop a year earlier. Analysts on average had expected a rise of 1.8%, according to Thomson Reuters data.

Shares of Wal-Mart, which were up 4.6% so far this year through Friday's closing price of $62.48, fell $1.65, or 2.6%, to $61.20 in premarket trading.

Wal-Mart earned $5.19bn or $1.51 per share from continuing operations attributable to the company, up from $5.02bn or $1.41/share a year earlier.

Excluding about 7 cents per share from certain tax matters and real estate transactions, Wal-Mart earned $1.44/share. The company had forecast a profit of $1.42 to $1.48 per share, which did not include the benefits.

Analysts, on average, expected it to earn $1.45/share, according to Thomson Reuters I/B/E/S.

Sales rose 5.8% to $122.29bn.

Wal-Mart forecast first-quarter earnings per share from continuing operations attributable to the company of $1.01 to $1.06, compared with a profit of 98c/share a year earlier, which included a lift of 1c from multiple items.

The company expects Walmart US same-store sales to be flat to up 2% in the first quarter.

It forecast fiscal year earnings per share from continuing operations attributable to the company of $4.72 to $4.92. In fiscal 2012 it earned $4.54/share, including 5c of benefits.

Wal-Mart's international business grew at a faster clip than the larger Walmart US. Operating income at Walmart International rose 15.2% to nearly $2.31bn, while Walmart US operating income rose 1.4% to $6.11bn.

On Monday, Wal-Mart said it was taking a controlling stake in Chinese e-commerce company Yihaodian to expand its international reach.