Scott dissatisfied with WMT results
By Brent Felgner -- Playthings, 5/15/2007 12:44:00 PM
BENTONVILLE, Ark.—While Wal-Mart’s domestic stores lagged, the retailer’s international stores and Sam’s Club warehouse operation pulled the company to an 8 percent gain in net profit on an 8.3 percent pick up in net sales during the first quarter, the company reported Tuesday. But U.S. same store sales remain challenged.
And the merchant warned that second quarter sales and earnings might come in at the low end of expectations.
Wal-Mart, the nation’s No. 1 toy retailer and the world’s largest retailer, posted net profit of $2.8 billion, or $0.68 per share, on sales of $86.4 billion. Sales in U.S. stores open at least a year rose 0.6 percent. That compares to $2.6 billion in net income on sales of$79.6 billion during the same quarter last year—with comp store gains of 3.8 percent.
“These are record sales and earnings but they are not where we would have expected to be, nor where we believe they should be,” said CEO Lee Scott, in a pre-recorded conference call. “Quite honestly, we are not satisfied with our overall performance.”
Sales in the company’s International business, which now accounts of 23 percent of total sales, grew 18.5 percent, compared to 5.6 percent increases each in Sam’s and U.S. Wal-Mart Stores.
Comp store sales in the U.S. declined 0.1 percent, while at Sam’s they rose 4.7 percent, excluding fuel purchases at the company’s gas stations.
For the second quarter, Wal-Mart estimated same store sales would increase 1 to 2 percent, while EPS would be between $0.75 and $0.79.
In Q1, however, gross margins improved 20 basis points, rising to 24.41 percent, the company reported.
“Wal-Mart U.S. experienced a tremendous amount of change during this past year,” Scott explained. “We are in the second year of an ambitious three year strategic plan that Eduardo Castro-Wright, president and CEO for the Wal-Mart Stores division, is leading to improve our business. While some points in the plan have not delivered the results yet that we would like to see, the core of that plan—improving our customer service and improving returns—is critical to continued success for our company.
“You will see us more committed than ever to price leadership,” Scott added.
Scott also pointed to difficulties in inventory management during the past quarter, resulting in consolidated inventories rising 10.3 percent compared to the sales rise of 8.3 percent.
The company said it remains committed to the goal of growing inventories at half the rate of sales increases.
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