Retailer's profit up less than forecast; says consumer spending continues to remain cautious.
November 13, 2003: 8:06 AM EST
NEW YORK (CNN/Money) - Wal-Mart Stores Inc. posted improved fiscal third-quarter earnings Thursday that narrowly missed Wall Street expectations for the period, as its executives said they aren't seeing much sign of strength in consumer spending.
The world's largest retailer earned $2 billion, or 46 cents per share, in the period ending Oct. 31, up from $1.8 billion, or 40 cents a share, it earned a year earlier. But analysts surveyed by earnings tracker First Call had a consensus forecast of 47 cents a share, with a range of estimates from 46 to 48 cents.
Chairman and CEO Lee Scott told investors and analysts that the company had clearly signaled what it expected for earnings in the quarter when it said last month that it was in the middle of its earlier guidance range of 45 to 47 cents a share for the period.
"It shouldn't have taken a calculator to come to the conclusion that 46 cents a share was the most likely outcome for the quarter," he said. "It was good we achieved these results even though October was the weakest in the period."
The company said it now expects fourth quarter earnings between 63 and 65 cents a share. First Call's EPS forecast is 65 cents for the period, with a range of estimates from 62 to 67 cents. But Chief Financial Officer Tom Schoewe said that the fourth quarter guidance should bring full-year earnings to between $2.03 to $2.05, which he said is at the upper end of the range of its earlier full-year guidance of $2 to $2.05.
Analysts estimate full-year profit to be $2.05 a share, according to First Call.
Scott said that much of the gain it sees is due to the comparison with relatively weak year-earlier results.
"The consumer still seems to us to be very cautious and probably will remain so until we see improvement in employment," Scott told the pre-recorded call for investors. "I don't think consumer spending is slowing but I don't see the strength many of you in the investment community appear to see."
Scott said the company's gross margin, which reflects revenue less the cost of goods sold, decreased for the first time in eight quarters.
Revenue was $62.5 billion, up 13.1 percent in the period, topping the First Call forecast of $62.3 billion. Sales from stores open at least a year, a closely watched retail measure known as same-store sales, rose 6.1 percent for the quarter, with same-store sales at its Wal-Mart division up 5.7 percent, while same-store sales climbed 8.0 percent in its Sam's Club wholesale stores unit.
Additionally, Wal-Mart expects November comparable store sales to be up between the 3 to 5 percent range.
"This penny up, penny down thing is silly," said Ulysses Yanas, analyst with Buckman, Buckman & Reid, referring to Wal-Mart's results. "Wal-Mart is doing well. Even though they are cautious , I think the company will do better in the fourth quarter because of a much slower quarter last year.
Added Yanas,"Wal-Mart's trajectory of comparable sales this year has trended higher than last year, and even on the employment level things are improving. So I expect Wal-Mart may beat expectations for the holiday quarter."
Shares of Wal-Mart (WMT: Research, Estimates), a component of the Dow Jones industrial average, fell 21 cents in pre-market trading on Instinet following the release early Thursday to $57.75. It closed down 32 cents Wednesday.
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