Wal-Mart Net Up 10 Percent, Trims Forecast
Last updated Thursday, November 13, 2008 10:07 PM CST in Business
By Kimberly Morrison
THE MORNING NEWS
Wal-Mart Stores Inc. on Thursday posted a 10 percent increase in its third-quarter profit, but lowered its full-year outlook because of a troubled world economy and the renewed strength of the dollar.
“We are very pleased with our results this quarter,” CEO Lee Scott said in a release. “Despite economic difficulties around the world, we achieved solid sales and earnings growth and we are optimistic about the upcoming holidays.”
Scott said the retailer’s focus on low prices was driving customers into the store, and holiday marketing would focus heavily on saving at the store to keep up the momentum. Although optimistic, Scott said he was also “realistic about the holidays and our sales performance.”
Economists have forecast the worst holiday shopping season in more than 20 years.
In the past year, global stock markets have lost approximately $32 trillion in notional value — $12 trillion of that was destroyed in October alone, according to FTI Consulting Inc., based in Baltimore.
And in addition to domestic woes in the housing and credit markets, particularly deep calendar shifts over the holiday shopping season is expected to also adversely affect holiday spending, said Richard Hastings, an economist and consumer strategist with Global Hunter Securities in Newport Beach, Calif.
There are fewer total days during the season, five fewer days between Black Friday and Christmas Eve and start of Hanukkah 17 days later than last year — all which add another layer of potential weakness to this year’s results, Hastings said.
All that creates a relative perfect storm for Wal-Mart and other discount retailers like Family Dollar and Dollar Tree Stores, and warehouse clubs Costco Wholesale Corp. and BJ’s Wholesale Club.
“The value shift towards wholesale clubs and Wal-Mart has accelerated very quickly in recent months, removing traffic and dollars available for conversion at other channels, especially department stores,” Hastings said. “There is no near-term chance to reverse this effect.”
It’s a near-perfect storm for Wal-Mart, which spent the last three years cleaning up its stores and refining its merchandise assortment. Coupled with the company’s renewed focus on price, Wal-Mart is one of few bright spots in retail.
“It is our time and we have momentum from the third quarter,” Scott said in a prerecorded conference call.
The Bentonville-based retailer said it earned a net income of $3.14 billion, or 80 cents per share, in the quarter ended Oct. 31, up from $2.86 billion, or 70 cents per share, a year ago.
Net sales for the quarter were $97.6 billion, an increase of 7.5 percent from the prior-year period.
Tom Schoewe, chief financial officer, said the retailer “tightened and modestly reduced” its full-year guidance and now forecast diluted earnings per share to be within a range of $3.42 to $3.46.
Shares of Wal-Mart (NYSE: WMT) closed Thursday at $54.93, up $2.31. For the past 52 weeks, the share price has ranged from a $63.85 high to a $43.11 low.
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