By  on February 17, 2009

Wal-Mart Stores Inc. demonstrated the importance of price on Tuesday when it posted fourth-quarter profits that beat expectations and sales that were its highest ever.

The retailer said net profits for the three months ended Jan. 31 dropped 7.4 percent to $3.8 billion, or 96 cents a diluted share, from $4.1 billion, or $1.02 a diluted share, a year earlier, but the numbers beat the company’s previously lowered forecast. Last month, Wal-Mart reduced its profit estimates for the quarter to a range of 91 cents to 94 cents a share from the $1.03 to $1.07 previously expected. Revenues for the quarter inched up 1.7 percent to a record-breaking $109.1 billion from $107.3 billion.

“Our performance relative to competitors was exceptionally strong in the fourth quarter and throughout the year,” said Mike Duke, the firm’s president and chief executive officer, during an earnings call. “We expect this momentum to continue. We’ve built strong momentum during the past year in a very tough economy. We will take what has worked for us and work hard at doing it even better.”

Net sales for the fourth quarter were $108 billion, an increase of 1.7 percent from $106.2 billion in the previous year’s fourth quarter. Income from continuing operations for the quarter was $3.8 billion, a decrease of 7.7 percent from $4.1 billion in the fourth quarter last year. The retailer paid $255 million to settle 63 class action wage and hour lawsuits.

Wal-Mart’s earnings for the full year rose 5.3 percent to $13.4 billion, or $3.39 a diluted share, on a 7.2 percent increase in revenues to $405.6 billion.

Looking forward, the company projected earnings of 72 to 77 cents a share for the first quarter and $3.45 to $3.60 for the current fiscal year.

“Wal-Mart is a clear out-performer in a challenging economy, benefiting not just from its price-value leadership, but also its upgraded soft-goods strategy that has infused the store with more compelling branded apparel names such as Norma Kamali, Ocean Pacific (Op), L.E.I., Danskin and Starter,” said Todd Slater, a retail, apparel and footwear analyst at Lazard Capital Markets.

Bill Dreher, a retail analyst at Deutsche Bank, said Wal-Mart will be a beneficiary of brands migrating out of department stores. “Right now the company is laying the groundwork for the improvement of the economy [when it will] be able to focus on greater merchandise clarity, more intuitive store planagrams as well as price leadership and cost reduction. Clearly, the apparel and home and other discretionary categories are being structured correctly. Dottie [Mattison, senior vice president over women’s apparel, jewelry, shoes and accessories as well as product development,] seems to be doing a great job of transitioning that department out of Arkansas and into New York. They will be able to transition the consumer to move across the aisle” when the economy improves.

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