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Wal-Mart income up 14.1% in 1Q

Even though sales came in on the light side, dipping beneath the double-digit mark, first-quarter profits at Wal-Mart Stores, the world's largest retailer, still managed to climb by 14.1 percent, to $1.8 billion from $1.6 billion last year.

Holding up the bottom line, the retailer improved its margins and pared its interest costs, at the same time building its rapidly expanding international business, which recorded the retailers strongest sales and earnings gains during the period, outpacing U.S. Wal-Mart stores and Sam's Club.

Dipping below the benchmark double-digit point for the first time in recent memory, overall sales increased by 9.7 percent, to $56.7 billion from $51.7 billion a year ago. Same-store sales increased just 2.2 percent in a particularly rocky environment for U.S. retailers. Excluded from the sales total are results of the company's McLane grocery distribution business, which is being sold to conglomerate Berkshire Hathaway. If weakening sales at the McLane business had been included, overall Wal-Mart sales would have increased at a somewhat slower pace of 9.1 percent, the company reported.

In an assist to the bottom line, average gross margin widened by 20 basis points to 22.6 percent from 22.4 percent a year ago. Interest costs were whittled by 13.2 percent, to $250 million from $288 million, generating a cash savings of $38 million. Interest expense on debt was slashed by 21.5 percent, to $175 million from $223 million, offsetting a 15.4 percent increase in interest on capital leases, which rose to $75 million from $65 million.

But acting as a drag, inventories increased by 13.4 percent, to $25.9 billion, hampered by the disappointing sales.

Wal-Mart Stores Inc.

Qtr. 4/30 (x000) 2003 2002 % chg
Sales a $56,718,000 $51,705,000 9.7
Oper. income (EBIT) 2,584,000 2,368,000 9.1
Net income 1,861,000b 1,631,000b 14.1
Per share 0.42b 0.37 13.5
Average gross margin 22.6% 22.4%
SG&A expenses 18.0% 17.8%
a-Sales exclude results of the McLane grocery distribution subsidiary, which has been sold to Berkshire Hathaway. Including the McLane contribution, sales climbed by a smaller amount, 9.1 percent.
b-Results include $38 million in interest income, compared with $36 million last year; $506 million in other income, compared with $421 million last year; and a $42 million loss from the company's share of a joint venture, compared with a prior-year loss of $41 million. Results include the effect of a change in accounting for money received from suppliers, which had the effect of reducing net income by $101 million, or two cents per share, on an after-tax basis.
SEGMENT RESULTS
2003 2002 % chg
Wal-Mart
Sales $38,618,000 $35,418,000 9.0
Oper. income 2,752,000 2,545,000 8.1
Sam's Club
Sales 7,822,000 7,295,000 7.2
Oper. income 204,000 216,000 -5.6
International
Sales 10,278,000 8,992,000 14.3
Oper. income 384,000 339,000 13.3


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