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Wal-Mart comes up short of expectations

Helped by a rolling turnaround in its Sam's Warehouse Club business, as well as continued rapid expansion abroad, third-quarter profits at Wal-Mart Stores, advanced by 12.9 percent, to $2.0 billion from $1.8 billion.

But it wasn't good enough for demanding Wall Street investors, who'd been expecting slightly more than the 46 cents a share profit the retailer turned in. Rattled by the rare earnings disappointment from the world's largest retailer, — and further concerned when the retailer said in a conference call it's planning cautiously for Christmas — investors knocked the stock down by $2.35 a share, or 4.1 percent in value, to $55.61.

And it didn't stop there. When one of the world's largest and strongest companies starts to sneeze, Wall Street runs for the Kleenex, and in the ensuing rush last Thursday, Nov. 13, the Dow Jones Industrial Average slipped by 28 points, or 0.3 percent in heavy mid-afternoon trading.

Wal-Mart sales expanded by 13.1 percent during the quarter, to $62.5 billion from $55.2 billion last year, and same-store sales grew by 6.1 percent.

Extending a recent turnaround, Sam's Club operating profits rose by 12.5 percent, to $270 million, even faster than the rate of sales growth. Sales improved by 11.2 percent, to $8.6 billion from $7.7 billion. Same-store warehouse-club sales jumped up by 8.0 percent.

Sales in the core U.S. Wal-Mart Stores segment grew by 12.8 percent, to $42.4 billion from $37.6 billion, while comps increased by 5.7. Operating profits rose by 10.9 percent, to $3.0 billion from $2.7 billion last year.

International remained the fastest-growing of the company's business units, with sales climbing higher by 15.7 percent, to $11.5 billion from $10.0 billion last year. Operating profits from the rapidly expanding international segment shot up by more than a fourth, rising by 28.5 percent, to $5643 million from $439 million the prior year.

Conserving its cash and planning cautiously, Wal-Mart kept its stockpiles in check during the second quarter. Inventories rose just 8.8 percent, to $31.3 billion, well behind the 12.8 percent increase in sales.

Wal-Mart Stores Inc.

Qtr. 10/31 (x000) 2003 2002 % chg
a-Third-quarter results include $555 million in miscellaneous income, compared with $524 million in the prior-year period; and a $48 million loss from the company's minority share of a joint venture, compared with a year-ago loss of $43 million. The year-ago third quarter included $17 million in income from discontinued operations.
b-Nine-month results include $1.7 billion in miscellaneous income, compared with $1.5 billion a year ago; a $131 million loss from the company's share of a joint venture, compared with a loss the year before of $129 million; and $193 million in income from discontinued operations, compared with $82 million last year.
Sales $62,480,000 $55,241,000 13.1
Oper. income (EBIT) 2,844,000 2,524,000 12.7
Net income 2,028,000a 1,797,000a 12.9
Per share (diluted) 0.46 0.41 12.2
Average gross margin 22.7% 22.8%
SG&A expenses 18.2% 18.2%
Nine months 2003 2002 % chg
Sales 181,835,000 163,216,000 11.4
Oper. income (EBIT) 8,623,000 7,732,000 11.5
Net income 6,333,000b 5,447,000b 16.3
Per share (diluted) 1.44 1.22 18.0
Average gross margin 22.7% 22.6%
SG&A expenses 18.0% 17.9%


Third quarter segment results

Wal-Mart Stores 2003 2002 % change
Sales $42,386,000 $37,573,000 12.8
Same-store sales 5.7% NA
Oper. income 2,967,000 2,676,000 10.9
Sam's Clubs 203 2002 % change
Sales 8,607,000 7,742,000 11.2
Same-store sales 8.0% NA
Oper. income 783,000 730,000 7.3
International
Sales 11,487,000 9,926,000 15.7
Same-store sales NA NA
Oper. income 1,509,000 1,250,000 20.7


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