Shares in Wal-Mart Stores fell today (21 February) after the retail giant admitted price cuts in the US had led to lower margins from its local operations in the last quarter of its financial year.
Wal-Mart said operating income from its US stores increased 1.4% in the three months to 31 January. However, the retailer said “price investment” meant operating income grew at a slower rate than sales and led to lower gross profit margins.
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Net sales from Wal-Mart’s US operations were up 2.4%. Comparable-store sales increased 1.5% higher.
Bill Simon, president and CEO of Wal-Mart’s US operations, pointed to the benefits of Wal-Mart’s pricing strategy.
“Our stores have greater price leadership, broader assortment, and improved on-shelf availability. The combination of these factors contributed to positive traffic,” he said. “We invested in price in the fourth quarter and will continue to do so through this fiscal year, so we can pass savings on to customers.”
Shares in Wal-Mart were down 3.19% at $60.49 at 09:32 ET today.
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By GlobalDataThe retailer reported mixed results for the fourth quarter and for the entire year. In the last three months of its financial year, Wal-Mart’s net sales increased 5.8% to $122.29bn. Operating income was up 5% at $8.4bn.
Wal-Mart’s consolidated net income was down 14.7% at $5.16bn due to the absence of earnings from operations that were discontinued during the year. However, net income a year ago included a tax benefit related to Wal-Mart’s former German operations, which it offloaded in 2007 and which counted as the discontinued operations. Net income from continuing operations was up 5% at $7.87bn.
In 2011, Wal-Mart saw its net sales increase 5.9% to $443.85bn. Operating income was up 4% at $26.56bn. Net income, however, fell 4.2% to $15.7bn. However, removing the impact of the discontinued operations in Germany, net income was up 3.1% at $16.45bn.
In the US, Wal-Mart saw its net sales increase 1.5% from its US stores in 2011. Comparable-store sales, excluding fuel, inched up 0.2%. Net sales from the retailer’s Sam’s Club warehouse unit grew 8.8% on the back of a 5.1% increase in comparable-store sales, excluding fuel.
Outside the US, Wal-Mart’s sales increased 15.2% due to the contribution of the Netto chain in the UK and its majority stake in South African retailer Massmart Holdings.
Wal-Mart saw operating income from its US stores increase 2.2% in 2011. Opearting earnings from its Sam’s Club warehouse unit were up 9%. Operating income from the retailer’s international arm was up 10.8% thanks in part to the benefit of foreign exchange.
Click here for the full Wal-Mart statement.
