Wal-Mart Warns 4Q Profits Could Disappoint
by January 16, 2006 12:00 am 55 views
Wal-Mart Stores Inc. of Bentonville said on Dec. 5 that its fourth-quarter profit would be at the low end of its forecast — 82 cents to 86 cents per share — after a disappointing December. Analysts at Thomson First Call had expected 84 cents per share. The company’s fourth quarter and fiscal year will end on Jan. 31.
The world’s largest retailer said December same-store sales in the U.S. rose just 2.2 percent after expensive promotions failed to boost Christmas sales. Wal-Mart had predicted an increase of 2 percent to 4 percent in sales at stores open for more than a year.
The growth in December sales came primarily from groceries, not general merchandise, which has a higher profit margin.
Total sales for the five-week period ended Dec. 30 increased 6.3 percent to $40.8 billion.
Wal-Mart got off to a good start this holiday season with aggressive advertising and discounts in November, making the day after Thanksgiving its best day of the year.
But sales declined in December as shoppers waited for deeper discounts and pocketed gift cards to redeem in 2006. With the gift card use expected in January, Wal-Mart predicted a 3 percent to 5 percent increase in comparable-store sales for that month.
Wal-Mart changed its strategy in the past year, offering some higher-priced items to attract more affluent consumers. That strategy has worked for its rivals Target Corp. and Costco Wholesale.