On the comeback, Sam's aids Wal-Mart

Don Hogsett, August 18, 2003

Helped by a turnaround in its Sam's Club warehouse business, and the continued rapid expansion of its international franchise, second-quarter profits at Wal-Mart Stores jumped up by 21.1 percent, to $2.4 billion from $2.0 billion last year.

Sales at the world's largest retailer rose by 11.3 percent, to $62.6 billion from $56.3 billion, somewhat held in check by lackluster sales growth of just 10.2 percent in its core U.S. Wal-Mart stores, to $42.6 billion from $38.6 billion a year ago. Picking up some of the slack, the retailer's international sales shot up by 18.8 percent, to $11.5 billion. And sales at Sam's, improved by 7.7 percent, to $8.6 billion from $7.9 billion.

Sailing along a turnaround course, Sam's actually outperformed the larger, core Wal-Mart Stores in terms of earnings growth during the second quarter, pushing operating profits up at a double-digit pace, by 12.8 percent, to $309 million from $274 million last year.

Earnings growth at U.S. Wal-Mart stores, by contrast, was well off its usual fast pace, rising by 9.3 percent, to $3.3 billion from $3.0 billion.

Growing twice as fast as the U.S. stores, operating profits in the international segment jumped up by 18.9 percent, to $561 million from $472 million.

Measured in terms of comps, Sam's Club once again outperformed the U.S. discount stores, with a 3.6 percent increase vs. 3.1 percent growth for Wal-Mart stores in a difficult retail environment, hampered by bad weather throughout much of the first half that dampened sales of seasonal merchandise.

Despite the environment, the retailer managed to strengthen its margins by 20 basis points, or two-tenths of a percentage point, to 22.9 percent from 22.7 percent. But offsetting any margin growth were higher costs, which rose to 17.8 percent of sales from 17.6 percent a year ago.

Wal-Mart Stores Inc.

Qtr. 7/31 (x000) 2003 2002 % chg
a-Second-quarter results include $595 million in miscellaneous income, up 16.7 percent from $510 million last year; a $41 million loss from the company's share of a joint venture, compared with a year-ago loss of $45 million; and $161 million in income from discontinued operations, compared with $19 million in 2002.
b-Six-month results include $1.1 billion in miscellaneous income, up 18.1 percent from $932 million last year; a loss of $83 million from the company's stake in a joint venture, compared with a year-ago loss of $86 million; and $193 million in income from discontinued operations, compared with $64 million last year.
Sales $62,637,000 $56,271,000 11.3
Oper. income (EBIT) 3,197,000 2,841,000 12.5
Net income 2,444,000a 2,019,000a 21.1
Per share (diluted) 0.56 0.45 24.4
Average gross margin 22.9% 22.7%
SG&A expenses 17.8% 17.6%
Six months 2002 2001 % chg
Sales 119,354,000 107,975,000 10.5
Oper. income (EBIT) 5,778,000 5,209,000 10.9
Net income 4,305,000b 3,650,000b 17.9
Per share (diluted) 0.98 0.82 19.5
Average gross margin 22.7% 22.5%
SG&A expenses 17.9% 17.7%

Second quarter segment results

2002 2001 % change
Sales $42,570,000 $38,641,000 10.2%
Oper. income 3,317,000 3,036,000 9.3
Sam's Club
Sales $8,553,000 $7,939,000 7.7%
Oper. income 309,000 274,000 12.8
Sales 11,514,000 9,691,000 18.8
Oper. income 561,000 472,000 18.9

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