Wal-Mart, Target Profits Rise on Sales
Wal-Mart, Target Profits Rise on Sales
Thu Feb 17, 2005 09:43 AM ET By Mark Weinraub
NEW YORK (Reuters) - The two largest U.S. retailers, Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research) and Target Corp. (TGT.N: Quote, Profile, Research) reported higher fourth-quarter profits on Thursday on double-digit sales growth.
Wal-Mart, the world's No. 1 retailer, said quarterly earnings rose 16 percent as sales gained from store expansion, beating Wall Street expectations.
But the company, which opened 389 new stores during the fiscal year, said results could have been better. President and Chief Executive Lee Scott said the retailer did not have enough merchandise to meet demand, particularly for mid- and premium-priced products.
"We left a lot on the table," Scott said on a recorded call. "We intend to, and in fact are addressing these issues,"
Wal-Mart earnings rose to $3.16 billion, or 75 cents per share, for the quarter ended Jan. 31, from $2.72 billion, or 63 cents per share, a year earlier.
In November, Wal-Mart forecast profit of 73 cents to 75 cents a share. Analysts, on average, estimated 74 cents, according to Reuters Estimates.
Meanwhile, Target said profit edged up to $825 million, or 91 cents per share, in its fourth quarter, from $823 million, or 90 cents a share, a year earlier. Target said sales jumped 11 percent.
Shares of Wal-Mart rose 30 cents to $52.90 Thursday on the New York Stock Exchange, while Target shares gained 64 cents, or 1.4 percent, to $49.71 on the NYSE.
CUTTING COSTS
Wal-Mart has cut its costs by buying more merchandise in less expensive overseas locations, said Bill Dreher, an analyst at Deutsche Bank.
"It's a very strong quarter, driven by improvement in the cost of sales, which is likely benefiting from global sourcing initiatives, which allows them to lower the source of their internationally acquired product."
But interest expenses, which are likely to rise by about 25 percent in 2005, and other factors are pressuring the retailer, Dreher said.
"They continue to wrestle with higher costs, including store labor, utility and health-care costs, but it sounds like they are going to be aggressively attacking those costs," said Dreher, who rates the stock a "buy."
The company said it expects further growth this year.
Sales rose 10.4 percent to $82.22 billion from $74.49 billion. Sales at U.S. stores open for at least a year, a key measure of retail strength, rose 1.4 percent.
Sales missed analysts' revenue forecasts of $82.63 billion. The company said earlier that sales in January were hurt by a shift in pre-Super Bowl sales to February and unseasonable weather in parts of the United States.
Wal-Mart forecast first-quarter earnings of 56 cents to 58 cents per share, with same-store sales expected to grow at the lower end of a 3 percent to 5 percent range. The retailer warned it faced a tough comparison with last year, when sales grew 6.4 percent, and there was an extra sales day due to leap year.
For the year, Wal-Mart said it expected earnings in a range of $2.70 to $2.74 per share.
According to Reuters Estimates, the average analyst forecast was 56 cents for the quarter and $2.73 for the year.
Target's revenue rose to $15.19 billion from $13.68 billion, the company said in a statement. Sales at stores open at least a year increased 5.4 percent.
Target's fourth-quarter results, which included a 1 cent per share gain from the disposal of assets, beat the analysts' average forecast of 89 cents a share, according to Reuters Estimate. (Additional reporting by Brad Dorfman in Chicago)
February 18, 2005
Outlooks Differ at Wal-Mart and Target
By CONSTANCE L. HAYS
NyTimes
al-Mart Stores, the discount retail giant, rang up more than $288 billion in sales last year, the company announced yesterday, an impressive total that kept it in first place among American corporations in terms of revenue.
But the fine print told another story - of higher expenses, slower growth and profit increasingly coming from sources other than the stores themselves - that had the company pledging to investors that it would plan better for this year.
Target, Wal-Mart's chief discount rival, reported yesterday that sales for the year were $46.84 billion, an increase of 11 percent over 2003, with net income of $3.51 a share. Analysts cheered the Minneapolis-based chain's performance.
At Wal-Mart, earnings per share rose to $2.41 for fiscal year 2005, up from $2.07. Total revenue was $288.2 billion, compared with $258.68 billion a year earlier, and net income increased to $10.27 billion, from $9.05 billion. Wal-Mart's fiscal year, like many retailers, ran to the end of January.
Sales in Wal-Mart stores open at least a year, known as same-store sales, rose 1.5 percent in the quarter, which includes the all-important holiday shopping season. For the year, same-store sales increased 3.3 percent, with a 2.9 percent increase at Wal-Mart Stores and a 5.8 percent increase at its Sam's Club warehouse division.
For most of the year, Wal-Mart was hampered by the effect of high gasoline prices on its customers, who typically are hourly wage earners. When gasoline prices rise, Wal-Mart executives have said, customers buy less.
In addition, concern about the economy has made many shoppers more cautious. Sales of groceries may remain steady, while sales decline for more discretionary items, like sporting goods or electronics, that are more profitable than groceries.
The chief executive, H. Lee Scott Jr., told investors in a conference call yesterday that Wal-Mart stumbled in its merchandising in the second half of last year. Unexpectedly sluggish post-Thanksgiving sales led Wal-Mart to reduce prices sharply on a small assortment of goods and to take out newspaper ads - both unusual moves for it.
Mr. Scott also said that Wal-Mart left "a ton of business on the table" by buying too little in some categories, which reduced inventory costs but also meant lost opportunities.
Whatever the reasons, sales did not increase the way Wal-Mart would have liked.
"Thank goodness they had MoneyGram," said Emme P. Kozloff, an analyst for Sanford C. Bernstein, noting that income from services like MoneyGram and check cashing through Wal-Mart contributed more than usual to the company's profits.
"But what you can tell is that over 60 percent of their profit came from these noncore items," Ms. Kozloff said. "The results were not particularly strong."
Other analysts also spotted signs of problems. "Operating-expense pressure remains a challenge for Wal-Mart," Wayne Hood, an analyst at Prudential Securities, wrote in a note to investors. "Expense pressure was the result of higher wage and utility costs, below-plan sales, and rising health care expenses. Management does expect to show improvement in expense management in 2005, although we would be surprised if expense growth didn't continue to outpace top-line growth."
Among the costs that increased at Wal-Mart was interest expense, which grew 47.8 percent, to $297 million in the fourth quarter, Shari Schwartzman Eberts, an analyst for J. P. Morgan Chase, said in a note to investors, calling it "worse than expected."
At the same time, corporate expenses fell 18.3 percent, to $277 million, she added, which was better than forecast.
Mr. Hood expressed concern about the performance of Sam's Club, the Wal-Mart warehouse division that caters to small businesses as well as consumers. Noting that profit grew 3.5 percent in the fourth quarter, compared with 13.3 percent in the third quarter, he wrote: "We are forecasting 10 percent profit growth in 2005, but now have less confidence in that forecast."
The results at Target, which included growth of 5.3 percent for the year in stores open at least a year, won far more praise from analysts. Revenue for the year increased 11.5 percent, including $485 million in income from credit card operations. The company reported a charge of $65 million for the year because of an adjustment to its lease accounting system. Earnings per share rose to $3.51 for the year, from $1.97.
"A lot of accounting changes made it tough to see things clearly, but at the end of the day, they are out-executing Wal-Mart," Ms. Kozloff said. "They are feeling very good about the business," she said, predicting 5 percent sales growth for this year as well.
Target also reported higher expense rates, but benefited from a trimmed-down operation that sold its Mervyn's and Marshall Field's chains for $4.9 billion during 2004. In addition to intensifying its focus on Target Stores, its star performer, the sale means "they don't have nearly as much debt anymore," Ms. Kozloff said.
Thu Feb 17, 2005 09:43 AM ET By Mark Weinraub
NEW YORK (Reuters) - The two largest U.S. retailers, Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research) and Target Corp. (TGT.N: Quote, Profile, Research) reported higher fourth-quarter profits on Thursday on double-digit sales growth.
Wal-Mart, the world's No. 1 retailer, said quarterly earnings rose 16 percent as sales gained from store expansion, beating Wall Street expectations.
But the company, which opened 389 new stores during the fiscal year, said results could have been better. President and Chief Executive Lee Scott said the retailer did not have enough merchandise to meet demand, particularly for mid- and premium-priced products.
"We left a lot on the table," Scott said on a recorded call. "We intend to, and in fact are addressing these issues,"
Wal-Mart earnings rose to $3.16 billion, or 75 cents per share, for the quarter ended Jan. 31, from $2.72 billion, or 63 cents per share, a year earlier.
In November, Wal-Mart forecast profit of 73 cents to 75 cents a share. Analysts, on average, estimated 74 cents, according to Reuters Estimates.
Meanwhile, Target said profit edged up to $825 million, or 91 cents per share, in its fourth quarter, from $823 million, or 90 cents a share, a year earlier. Target said sales jumped 11 percent.
Shares of Wal-Mart rose 30 cents to $52.90 Thursday on the New York Stock Exchange, while Target shares gained 64 cents, or 1.4 percent, to $49.71 on the NYSE.
CUTTING COSTS
Wal-Mart has cut its costs by buying more merchandise in less expensive overseas locations, said Bill Dreher, an analyst at Deutsche Bank.
"It's a very strong quarter, driven by improvement in the cost of sales, which is likely benefiting from global sourcing initiatives, which allows them to lower the source of their internationally acquired product."
But interest expenses, which are likely to rise by about 25 percent in 2005, and other factors are pressuring the retailer, Dreher said.
"They continue to wrestle with higher costs, including store labor, utility and health-care costs, but it sounds like they are going to be aggressively attacking those costs," said Dreher, who rates the stock a "buy."
The company said it expects further growth this year.
Sales rose 10.4 percent to $82.22 billion from $74.49 billion. Sales at U.S. stores open for at least a year, a key measure of retail strength, rose 1.4 percent.
Sales missed analysts' revenue forecasts of $82.63 billion. The company said earlier that sales in January were hurt by a shift in pre-Super Bowl sales to February and unseasonable weather in parts of the United States.
Wal-Mart forecast first-quarter earnings of 56 cents to 58 cents per share, with same-store sales expected to grow at the lower end of a 3 percent to 5 percent range. The retailer warned it faced a tough comparison with last year, when sales grew 6.4 percent, and there was an extra sales day due to leap year.
For the year, Wal-Mart said it expected earnings in a range of $2.70 to $2.74 per share.
According to Reuters Estimates, the average analyst forecast was 56 cents for the quarter and $2.73 for the year.
Target's revenue rose to $15.19 billion from $13.68 billion, the company said in a statement. Sales at stores open at least a year increased 5.4 percent.
Target's fourth-quarter results, which included a 1 cent per share gain from the disposal of assets, beat the analysts' average forecast of 89 cents a share, according to Reuters Estimate. (Additional reporting by Brad Dorfman in Chicago)
February 18, 2005
Outlooks Differ at Wal-Mart and Target
By CONSTANCE L. HAYS
NyTimes
al-Mart Stores, the discount retail giant, rang up more than $288 billion in sales last year, the company announced yesterday, an impressive total that kept it in first place among American corporations in terms of revenue.
But the fine print told another story - of higher expenses, slower growth and profit increasingly coming from sources other than the stores themselves - that had the company pledging to investors that it would plan better for this year.
Target, Wal-Mart's chief discount rival, reported yesterday that sales for the year were $46.84 billion, an increase of 11 percent over 2003, with net income of $3.51 a share. Analysts cheered the Minneapolis-based chain's performance.
At Wal-Mart, earnings per share rose to $2.41 for fiscal year 2005, up from $2.07. Total revenue was $288.2 billion, compared with $258.68 billion a year earlier, and net income increased to $10.27 billion, from $9.05 billion. Wal-Mart's fiscal year, like many retailers, ran to the end of January.
Sales in Wal-Mart stores open at least a year, known as same-store sales, rose 1.5 percent in the quarter, which includes the all-important holiday shopping season. For the year, same-store sales increased 3.3 percent, with a 2.9 percent increase at Wal-Mart Stores and a 5.8 percent increase at its Sam's Club warehouse division.
For most of the year, Wal-Mart was hampered by the effect of high gasoline prices on its customers, who typically are hourly wage earners. When gasoline prices rise, Wal-Mart executives have said, customers buy less.
In addition, concern about the economy has made many shoppers more cautious. Sales of groceries may remain steady, while sales decline for more discretionary items, like sporting goods or electronics, that are more profitable than groceries.
The chief executive, H. Lee Scott Jr., told investors in a conference call yesterday that Wal-Mart stumbled in its merchandising in the second half of last year. Unexpectedly sluggish post-Thanksgiving sales led Wal-Mart to reduce prices sharply on a small assortment of goods and to take out newspaper ads - both unusual moves for it.
Mr. Scott also said that Wal-Mart left "a ton of business on the table" by buying too little in some categories, which reduced inventory costs but also meant lost opportunities.
Whatever the reasons, sales did not increase the way Wal-Mart would have liked.
"Thank goodness they had MoneyGram," said Emme P. Kozloff, an analyst for Sanford C. Bernstein, noting that income from services like MoneyGram and check cashing through Wal-Mart contributed more than usual to the company's profits.
"But what you can tell is that over 60 percent of their profit came from these noncore items," Ms. Kozloff said. "The results were not particularly strong."
Other analysts also spotted signs of problems. "Operating-expense pressure remains a challenge for Wal-Mart," Wayne Hood, an analyst at Prudential Securities, wrote in a note to investors. "Expense pressure was the result of higher wage and utility costs, below-plan sales, and rising health care expenses. Management does expect to show improvement in expense management in 2005, although we would be surprised if expense growth didn't continue to outpace top-line growth."
Among the costs that increased at Wal-Mart was interest expense, which grew 47.8 percent, to $297 million in the fourth quarter, Shari Schwartzman Eberts, an analyst for J. P. Morgan Chase, said in a note to investors, calling it "worse than expected."
At the same time, corporate expenses fell 18.3 percent, to $277 million, she added, which was better than forecast.
Mr. Hood expressed concern about the performance of Sam's Club, the Wal-Mart warehouse division that caters to small businesses as well as consumers. Noting that profit grew 3.5 percent in the fourth quarter, compared with 13.3 percent in the third quarter, he wrote: "We are forecasting 10 percent profit growth in 2005, but now have less confidence in that forecast."
The results at Target, which included growth of 5.3 percent for the year in stores open at least a year, won far more praise from analysts. Revenue for the year increased 11.5 percent, including $485 million in income from credit card operations. The company reported a charge of $65 million for the year because of an adjustment to its lease accounting system. Earnings per share rose to $3.51 for the year, from $1.97.
"A lot of accounting changes made it tough to see things clearly, but at the end of the day, they are out-executing Wal-Mart," Ms. Kozloff said. "They are feeling very good about the business," she said, predicting 5 percent sales growth for this year as well.
Target also reported higher expense rates, but benefited from a trimmed-down operation that sold its Mervyn's and Marshall Field's chains for $4.9 billion during 2004. In addition to intensifying its focus on Target Stores, its star performer, the sale means "they don't have nearly as much debt anymore," Ms. Kozloff said.
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