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Wal-Mart slashes inventory to boost profits

3Q profits up 11.5%

Bentonville,Ark.-- Helped by continued deep cuts in stockpiles and rapidgrowth in its international operations, which offset sluggish sales in its coreU.S.store base,Wal-Mart Stores Inc. pushed third-quarterprofits up by 11.5% to $2.6 billion from $2.4 billion last year.

Same-store sales in U.S. Wal-Mart stores rose a sluggish 1.5%. Sales in the Sam's Club business were muted as well, with overall sales up 1.9% to $10.2 billion,andcomps up 1.8%.

A disproportionate share of the earnings increase came not out of merchandising operations, but from savings generated as the world's largest retailer continued to cap its merchandise inventories – pushing the warehousing function upstream to suppliers . Indeed, stockpiles grew only half as fast as overall sales during the quarter, by 6.2%, compared a 12.0% increase in sales.

“We will be relentless in establishing price leadership throughout the fourth quarter,” John Menzer, vice chairman, responsible for Wal-Mart U.S. , told analysts this morning. While it is no surprise that toys and electronics will be in the forefront of this pricing strategy, domestics are part of the retailer’s “roll-back” price mix, particularly bedding sets and comforters.

In time for the holiday spree, the retailer is opening 21 new units this month. And all store remodels will come to a halt after this week so as not to interfere with holiday shopping. They will resume in January.

Setting the right mood at the store level is important, said Lee Scott, president and ceo. After discovering that shoppers would like the retailer to include the word “Christmas” and not just the more generic “holidays” this year in its holiday program, Wal-Mart said it has implemented several efforts to respond. “You’ll hear Christmas carols in our stores and you’ll see Christmas on signage, gift cards and merchandise,” he said.

Furthermore, store associates are also “celebrating with everyone” by well-wishing customers with five popular greetings: Happy Holidays, Happy Hanukkah, Happy Kwanzaa, Feliz Navidad, “and of course, Merry Christmas,” Scott said.

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