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Wal-Mart net up to $3.6 billion

Retailer reports 9% quarterly income rise over same time last year

By Steve Painter

This article was published November 16, 2012 at 12:27 a.m.

a-woman-exits-a-wal-mart-store-in-north-kingstown-ri-on-tuesday-wal-mart-stores-inc-on-thursday-reported-a-profit-of-364-billion

A woman exits a Wal-Mart store in North Kingstown, R.I., on Tuesday. Wal-Mart Stores Inc. on Thursday reported a profit of $3.64 billion.

— Wal-Mart Stores Inc. on Thursday reported that third-quarter net income for the period ending Oct. 31 rose 9 percent over the same period a year ago to $3.64 billion, or $1.08 a share, up from $3.34 billion, or 96 cents a share.

The company’s stock price fell in trading on the New York Stock Exchange as it forecast fourth-quarter results that fell short of analysts’ expectations. The shares closed Thursday at $68.72, down $2.59 or 3.6 percent. The stock has traded between $56.26 and $77.60 in the past year.

Wal-Mart’s net sales for the third quarter rose 3.4 percent to $113.2 billion.

Sales at stores open at least a year rose 1.5 percent at the company’s U.S. stores division for the period ending Oct. 26. Same-store sales at the company’s Sam’s Club division, excluding fuel, also rose 1.5 percent.

Same-store sales, which exclude the impact of stores opened or closed in the past year, are a key measure of success in retailing.

Charles Holley, chief financial officer, said in a conference call with reporters that November sales are already ahead of plan and that the stores are ready for “Black Friday,” the day-after-Thanksgiving unofficial launch of the Christmas shopping season.

“They’re very well prepared for Black Friday,” he said.

Sales in the company’s international division rose 2.4 percent to $33.2 billion. Excluding the impact of fluctuating currency exchange rates, the increase would have been 6.8 percent.

Holley said fourth-quarter earnings are expected to be in the range of $1.53 to $1.58 a share.

“We do know that the fourth quarter will be very competitive,” he said.

Holley declined to answer questions about reported violations of the Foreign Corrupt Practices Act in Mexico said to involve bribery of local officials as the company grew rapidly in that nation.

In a filing with the Securities and Exchange Commission, Wal-Mart said it has incurred about $99 million in expenses related to the investigation of the reported violations. The U.S. Department of Justice is investigating the allegations.

In April, The New York Times reported that a company investigation found evidence that more than $24 million in payments were made and that Wal-Mart de Mexico executives knew about the payments but did not inform executives at Bentonville headquarters about them.

Wal-Mart had assigned an investigator, a former FBI special agent, to look into reports of bribes, and the investigator found “reasonable suspicion to believe that Mexican and USA laws have been violated,” according to reporting by the Times.

The investigator recommended that Wal-Mart expand the investigation, the newspaper reported.

Instead, the Times reported, Wal-Mart officials shut down the investigation, and neither U.S. nor Mexican law enforcement officials were notified about the claims. The issue had first been taken to the company’s attention in 2005.

As for the company’s quarterly financial results, Mike Duke, Wal-Mart’s president and chief executive officer, said in a release that he was pleased.

“Price will continue to be a major factor for U.S. customers over the holidays. Our strong price position and broad assortment are clear competitive advantages,” he said. “Across all of our markets, we are seeing the same price consciousness as we do in the United States.”

Bernard Sosnick, retail analyst with Gilford Securities in New York, said in a research note to clients that weaker than expected sales at Wal-Mart had caused a “sharp pullback” from the company’s stock. Still, he said, the stock has the potential to rise above $80 a share within the next year and toward $100 in the next several years.

“Wal-Mart is reinventing itself using its systems to provide seamless shopping experiences to keep its stores relevant in a digital era, offer new financial services and achieve a competitive advantage,” he said. “This transformation suggests that Wal-Mart will retain competitive vibrancy, gain market share and sustain a record of sales, earnings and dividend growth that, in our opinion, will support a move for Wal-Mart shares into the $80-$100 range within the next year or two.”

A research report by Baird Equity Research in Milwaukee said Wal-Mart’s fourth-quarter earnings guidance of $1.53 to $1.58 a share “likely disappoints” investors, but it notes that November results are tracking ahead of plan so far, with profits growing faster than sales.

The company has a price target of $80 per share on Wal-Mart’s stock.

Rival discounter Target Corp. of Minneapolis on Thursday reported net quarterly earnings of $637 million, or 96 cents a share, which included a 15-cents-ashare gain from the pending sale of its credit-card receivables portfolio.

“We’re pleased with Target’s third-quarter financial performance, which reflects superb execution across each of our business segments,” Gregg Steinhafel, chairman, president and chief executive officer, said in the company’s earnings release.

Target previously reported that third-quarter sales rose 3.4 percent to $16.6 billion.

The results included a 2.9 percent increase in same-store sales combined with sales at new stores.

Business, Pages 27 on 11/16/2012

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