Wal-Mart earnings up 14%; same-store sales disappoint

Wal-Mart sales in its U.S. division were up a scant 0.1% during fiscal year 2010, a possible sign that the American consumer remains hesitant to spend.

For the year, the Bentonville-based global retailer posted net income of $16.389 million, up 14.1% compared to the previous year. The per share earnings of $4.47 bested analyst estimates of $3.66.

Total revenue for the year was $421.849 billion, up 3.4% compared to the 2009 fiscal year.

Net income in the fourth quarter was $6.056 billion, up 27.3% above the 2009 quarter. Fourth-quarter earnings per share of $1.71 also pushed past the consensus estimate of $1.31.

The closely watched same-store sales barometer showed Walmart U.S. down 1.6%, a surprising loss compared to the 0.2% decline in the previous fiscal year.

Net sales in Walmart U.S. stores during fiscal year 2010 was $260.261 billion, up 0.1% compared to the previous year. Fourth quarter sales in the sector was $71.105 billion, down 0.5% compared to the 2009 period. Operating income in the Walmart U.S. segment was $19.914 billion during fiscal year 2010, up 3.1% compared to 2009.

“We are pleased with Walmart’s strong earnings performance for both the fourth quarter and the full year across our three operating segments. At the same time, we are disappointed by Walmart U.S. fourth quarter sales,” Mike Duke, Wal-Mart Stores president and CEO, said in the earnings statement released Tuesday (Feb. 22).

Duke said Walmart U.S. President and CEO Bill Simon is working on a “four-point plan” to improve sales. That plan may not see quick results, Duke cautioned.

“Some of the pricing and merchandising issues in Walmart ran deeper than we initially expected, and they require a response that will take time to see results,” Duke explained. “There is no greater priority for Bill or me than getting sales back into positive territory.”

The four-point plan appears to return Walmart to familiar operating concepts. Components of the plan are:
• “Walmart will deliver consistent every day low price on a basket of goods.”
• “Walmart is always working with suppliers to deliver the broadest and most relevant assortment possible at the lowest price in the market. This includes continued focus on adding merchandise back on the shelves, as well as in action alley in the stores.”
• “Improve store remodel efficiency and returns to right size square footage for various merchandise departments and categories.”
• “Increase access for customers through multi-channel shopping options so they can shop on their own terms.”

The company’s international division once again pushed higher overall sales and earnings. The division had total 2010 revenue of $109.232 billion, up 12.1% compared to 2009. Operating income in the segment during 2010 was $5.606 billion, up 14.4% for the year. The sector performance was boosted by a $288 million currency exchange rate benefit for all of 2010.

“Walmart International continues to be our growth engine, and we expect accelerated growth in emerging markets,” Duke said.

Sam’s Club continued to see growth, with 2010 net sales of $49.459 billion up 3.4% over the 2009 period. Operating income in the segment was $1.711 billion, up 12.9%.

“Sam’s Club reached almost $50 billion in annual net sales. And, during the year, Sam’s Club comp sales, excluding fuel, improved sequentially every quarter, with the fourth quarter being the strongest,” Duke said in the statement.

Charles Holley, Wal-Mart Stores Inc. chief financial officer, set fiscal year 2011 earnings guidance in the range of $4.35 to $4.50 per share.

Wal-Mart shares (NYSE: WMT) were set to open at $55.38 on Tuesday. During the past 52 weeks the share price has ranged from a $57.90 high to a $47.77 low.