Wal-Mart Stores Inc. reported a 22 percent increase in its fourth-quarter profit as the world's largest retailer cut costs and slimmed down its inventories.
But a key measure of sales showed its third consecutive quarterly decline, the discounter said Thursday, as it continues to grapple with deflation in groceries and electronics and a tough economy. The company also offered a tepid earnings outlook.
Wal-Mart shares fell 82 cents to $53.24 in premarket trading.
The sales weakness is happening even as the discounter sees more customers and takes market share away from its rivals with aggressive discounting. Wal-Mart has promised investors that it plans to widen the price gap between itself and rivals as it cut costs and reinvests those savings to lower prices for shoppers, which in turn drives sales.
Wal-Mart earned $4.63, or $1.21 per share, in the quarter ended Jan. 31. That compares with $3.8 billion, or 96 cents per share, in the same quarter last year.
The company says that total sales rose 4.4 percent to $113.6 billion. However, sales at stores open at least a year fell 1.6 percent. That's considered an important measure of a retailer's health.
Analysts surveyed by Thomson Reuters expected a profit of $1.12 per share on revenue of $114.4 billion.
Mike Duke, Wal-Mart's president and chief executive, said in a statement that he expects continued strong growth from its international business this year but that U.S. sales will be more challenging in the first quarter.
"We remain focused on growing top line sales and expect improvement in the U.S. as the year progresses," he said.
Wal-Mart's U.S. division had a 0.5 percent decline in total sales to $70.97 billion in the quarter; Sam's Club sales increased 3.8 percent to $12.28 billion. The company's international business enjoyed a 19.5 percent gain to $29.57 billion.
Wal-Mart's U.S. division dragged down the company's sales at stores open at least a year. The namesake U.S. division suffered a 2 percent drop in the measurement, while Sam's Club had a 0.7 percent increase. That excludes sales from fuel. Analysts had expected sales at stores opened at least a year to be unchanged from a year ago.
The discounter doesn't expect that this key measure will get much better, estimating that sales at stores open at least a year will be anywhere from down 1 percent to up 1 percent at U.S. Walmart stores.
The company stopped reporting sales at stores open at least a year on a monthly basis last year.
Wal-Mart also said earnings for the first quarter would be in a range of 81 cents to 85 cents, on the light side of 85 cents expected by analysts surveyed by Thomson Reuters.
Wal-Mart, which generated a little more than $400 billion in sales in its latest fiscal year, is considered a key barometer of consumer spending, so economists closely monitor sales trends at the discounter that could indicate what kind of economic recovery the nation would face. Consumer spending — including such items as health care — accounts for 70 percent of U.S. economic activity.
Wal-Mart has been able to grab wealthier consumers trading down from higher-priced stores. But the discounter has also seen growing signs of financial strain among its core customers, noticing pronounced swings in spending between paycheck cycles.
To keep pulling in shoppers, the company is cutting costs such as how much inventory it carries and reinvesting those savings to lower prices for shoppers, which in turn drives sales. That increased revenue will in turn help the chain lower costs through efficiency, company officials have maintained.
As part of its cost-cutting strategy, Wal-Mart is consolidating some of it sourcing with Chinese exporter Li & Fung, which is forming a new company to manage the Wal-Mart Stores account and will buy goods valued at about $2 billion within its first year.
Wal-Mart has also been making trims throughout the year, cutting almost 14,000 jobs in the past 13 months. Earlier this month, it cut 300 administrative jobs at its headquarters.
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