Wal-Mart has announced a Q4 profit of $2 billion. Record profits are good news after Wal-Mart’s lackluster winter sales. The world’s largest retailer hopes that earnings growth will return to its previous high levels later this year, but even if the economy does not bounce back so soon, Wal-Mart has proved that its retail strength can support continued profitability.
Despite a recent profit warning on December sales, Wal-Mart reported record profits of $2.0 billion for the quarter ending January 31. Profits beat expectations by a penny at 45 cents per share. Even including the weak December, Wal-Mart profits are $80 million higher than in the same quarter last year. Total sales were up 10% from a year ago at $56.5 billion, while comparable store sales increased by 3%.
Still, Wal-Mart executives are expressing disappointment at the company’s weakest growth rate since 1996. But the results are not surprising given disappointing sales throughout the industry. The company is hoping that recent interest-rate reductions, a possible tax cut and lower gasoline prices will help encourage additional spending. The company said it sees earnings growing in the single digit range in the first half of the year, with double-digit growth in the second half.
Wal-Mart’s food sales have still been doing well, even in the slowing economy, rising 32% for the quarter. This growth helped sales of less vital products, providing a strong customer base from which to draw upon to purchase other goods. The Supercenters, which are warehouse-sized stores with extensive food ranges, did particularly well. They grew twice as fast as other Wal-Mart stores and produced higher growth-rates in non-food items than the traditional discount stores.
Wal-Mart has stores in all 50 US states, and is therefore subject to both regional and national sales trends. Even though earnings may not be as hoped, they are showing the resilience of Wal-Mart’s product offering. The slower retail environment is fairly indicative of reduced general consumer confidence in the economy, and while more optimistic attitudes would clearly be beneficial to the bottom line, Wal-Mart is proving that it can still do well, whatever the economic climate.
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