WalMart's value message rang loud and clear with thrifty shoppers in the fourth quarter, lifting the discount giant's earnings above Wall Street's views.
The world's biggest retailer earned $1.03 a share excluding nonrecurring items, about flat with a year ago and 4 cents above forecasts. Sales rose 2% to $109.12 billion, slightly below views.
WalMart shares jumped 4%, the only Dow component to buck Tuesday's sharp sell-off.
But even WalMart, which has been among retail's top performers the past year, isn't immune to the chilly spending climate. The quarter's sales gains were the weakest in years. Shares have been trading near a 52-week low.
The challenging economy has impacted everyone, including Wal-Mart customers, says Joe Feldman, retail analyst at Telsey Advisory Group.
"But it's holding up better than most other retailers," he said. "In fact, Wal-Mart is taking share in this environment."
WalMart had a strong close to the quarter, said new CEO Mike Duke in a conference call. But the stronger dollar hurt overseas sales.
The retail giant also took a 7-cents-a-share charge to settle class-action lawsuits.
Same-store sales rose 2.8% vs. a year ago, while most retailers suffered declines.
In the conference call, WalMart vice chairman Eduardo Castro-Wright said he believes the company's six merchandising units are outperforming leading rivals in each area on a comp basis.
Overall, analysts expect retailers' fourth-quarter profits to slide 23.2% vs. a year ago, says Ken Perkins, president of Retail Metrics.
WalMart has been a bright spot in today's dreary retail space as its low prices and broad array of food and other staples draw recession-ravaged consumers like a magnet.
"WalMart is clearly taking share," said analyst Bill Dreher of Deutsche Bank. "It's one of the only retailers to show a traffic increase over the last four months and in the fiscal year. Wal-Mart clearly has solid momentum."
January finished strong and February is off to a good start, Duke said.
In the latest quarter, WalMart maintained a tight grip on expenses and inventories, Dreher said.
At the same time, it generated strong free cash flow. It says it intends to resume buying back shares this quarter.
WalMart's strong value message resonates with consumers today, said analyst Wayne Hood of BMO Capital Markets.
"Now is the opportunity for WalMart to shine, and they're certainly doing that," he said.
Consumers are looking for basics at the prices WalMart offers, adds Feldman. And once in the stores, they are seeing a better environment, with cleaner stores and improved services, he said.
WalMart seems to be drawing a wider consumer base as middle-income people seek to be more frugal, added Dreher.
Wal-Mart pegs its full-year profit at $3.45-$3.60 a share. That assumes exchange rates stay where they were at year-end. That would hurt earnings by 13 cents.
It expects first-quarter same-store sales to rise 1%-3%.
"The (earnings) guidance for the quarter and the year are very doable, perhaps even conservative," said Dreher.
But Wal-Mart faces some foreign-exchange head winds in '09 through at least the first three quarters of the year, said Feldman.
It also will face pressure if macroeconomic conditions worsen, he says.
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