Wal-Mart’s Revenue Drops in Quarter
Wal-Mart, the giant discount chain and unofficial barometer of consumer spending, posted flat year-over-year earnings in its most recent quarter — an accomplishment in this economy.
Most retailers — even discount stores, which have been faring relatively well — are not expected to report year-over-year sales growth in the first months of their fiscal year.
Several chains including Bon-Ton, Saks, Sears and Dillards are not even expected to make a profit, according to Retail Metrics, a research firm.
For the three months ended April 30, Wal-Mart, the country’s largest retailer, had a profit of $3.02 billion, or 77 cents a share, compared with $3.02 billion, or 76 cents a share, for the period a year ago. In earlier reports, Wal-Mart had warned that results would be hurt by currency exchange rates.
Revenue fell 0.6 percent to $93.47 billion, from $94.04 billion a year earlier.
Last week, the company said for the first quarter, sales at stores open at least a year, a measure of retail health known as same-store sales, increased 3.7 percent, not including fuel. Same-store sales in April rose 5.9 percent.
Indeed, Wal-Mart has had good results of late. Its low prices on everything from generic prescription drugs to frozen pizzas have helped it take market share from ailing and bankrupt retailers, as well as supermarkets and grocery stores. More people are shopping its stores, and they are spending more.
Eduardo Castro-Wright, vice chairman of Wal-Mart’s United States operations, said in a recorded conference call for investors that about 17 percent of Wal-Mart’s customer traffic came from new customers. He added that their average basket size is 40 percent higher than Wal-Mart’s average — proof that shoppers were trading down.
Bob Drbul, a retailing analyst with Barclays Capital, estimated that 27 percent of Wal-Mart’s sales growth in February came from new households.
“When economic conditions improve, we believe customers who shop Wal-Mart today will stay with us, because of the business improvements we’re making and continue to make,” Michael T. Duke, Wal-Mart’s president and chief executive, said in a statement.
Declining gas prices, compared with last year, also helped drive customers to Wal-Mart. And the retailer’s efforts to be the go-to destination for holiday gifts and decorations paid off: comparable sales of Easter-related merchandise grew 7.6 percent from a year ago.
Wal-Mart said it expected to earn 83 to 88 cents a share in its current quarter, and that same-store sales at its United States and Sam’s Club stores will each be flat to up 3 percent.
Also on Thursday, Kohl’s, the discount apparel chain, reported that for the three months ended May 2, its profit fell to $137 million, or 45 cents a share, compared with $153 million, or 49 cents a share, a year ago. That was better than what retailing analysts had been expecting.
Despite the decline, Kohl’s has been a favorite of many analysts who think it is well-positioned to thrive when the economy turns around. Analysts have praised Kohl’s management team, its investments in technology, even its marketing.
And the company is proving to be adept at hooking consumers on its exclusive name-brands, which account for 44 percent of Kohl’s sales. In February Kohl’s rolled out a clothing line by Dana Buchman that executives said has been selling better than they expected. In July, in time for back-to-school shopping, the MUD children’s apparel brand will become exclusive to Kohl’s. And in October, a line of clothing by Lauren Conrad — the star of “The Hills,” MTV’s popular reality series — will reach stores.
While other retailers are cutting back, Kohl’s has bought stores once occupied by the bankrupt Mervyn’s chain, and is moving into new areas of the country.
“We are focused on gaining market share in this difficult environment,” Kevin Mansell, president and chief executive of Kohl’s said in a statement. In a conference call Thursday with analysts and investors, Kohl’s executives said the company should able to capitalize on even more real estate opportunities and continue to steal market share as the industry consolidates. For the three months ended Aug. 1, the company expects to earn 56 to 64 cents a share. Kohl’s also updated its guidance for its fiscal year 2009. It is now expects to earn $2.19 to $2.42 a share, up from its previous guidance of $2 to $2.30 a share.
“The consumer mindset has changed,” Mr. Drbul said, noting that both Wal-Mart and Kohl’s have earned the trust of shoppers in need of low prices. “These are two retailers that are both very mindful of that consumer.”
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