NEW YORK--It's all about Wal-Mart.Wal-Mart did for the first-quarter profits of the retail sector pretty much what it did for same-store sales throughout the quarter, constituting the difference between a quarter that was simply soft and one that could have been dramatically down.Even with Wal-Mart's $1.65 billion in net income for the three months, profits for a group of 37 top retailers compiled by WWD dropped 36 percent to $1.56 billion, including special charges, for the first three months of the fiscal year (see chart on page 16). This compared with year-ago net income of $2.43 billion. The group's top line had better luck, though, and picked up 8 percent, rising to $116.3 billion from $107.53 billion a year ago. For most stores, the quarter ended in April and results were reported into June.Heralded as one of the industry's most-efficient operators, Wal-Mart's performance left the rest of the industry in the dust. Following closest were Target Corp. with earnings of $345 million and off-pricer TJX Cos. with $147 million. Rounding out the top five were Sears, Roebuck & Co. and Kohl's Corp with net income of $110 million and $107 million, respectively.Without Wal-Mart Stores, the world's largest retailer and company, the remaining 36 firms lost a combined $93 million for the quarter. This compared with sans-Wal-Mart profits of $1.05 billion a year ago. Sales for the truncated group inched up only 3 percent to $61.34 billion from $59.47 billion.However, if the $1.45 billion losses of bankrupt Kmart Corp. are removed from the tabulation along with Wal-Mart's hefty profits, the group finishes with an aggregate net profit of $1.36 billion for the quarter.Behind Kmart on the red-ink side of the profit-loss line was Saks Inc. with a $25 million deficit, followed by Elder-Beerman Stores ($18 million), Wilsons the Leather Experts ($15 million) and Bon-Ton Stores ($4 million).Wal-Mart may have carried the quarter in terms of sales and earnings power, but it was Chico's FAS that headed the class with the pace of its organic top-line growth and comparable-store sales. The Fort Myers, Fla.-based firm's sales leapt 40 percent to $130 million while comps for the quarter pushed ahead 13.2 percent. Charming Shoppes, through its acquisition of Lane Bryant from Limited, drove revenues up 60 percent to $631 million, but comped down 1 percent.At the other end of the revenue spectrum was Gap Inc. and its 9 percent drop in sales to $2.89 billion, the group's largest downward shift. Gap's comps also sunk to the bottom of the ledger with a 17 percent drop, more than 6 percentage points greater than Wilsons the Leather Experts' 10.3 percent decline.While times were tough, tighter inventories at many retailers helped prop up profits for the quarter as sales often lagged or came in flat."Suffice it to say U.S. retailers as a group did one heck of a job of inventory control," said A.G. Edwards equity analyst Robert Buchanan in a research note. The investment firm's inventory-to-sales ratio index, which tracks leading domestic retailers, dropped 2.4 percent in the quarter. Although the index has fallen in 25 of the last 26 quarters, the drop for the last quarter was the largest in the more than 10 years that A.G. Edwards has tracked the critical ratio.While economic pressures of late have forced retailers to keep their inventories down, Buchanan noted technology spending before the downturn, that made better control possible, came in handy."With retailers as a group arguably having underinvested in technology vis-a-vis inventory control and related activities--such as merchandising; planning and allocation; and financial reporting--for the better part of 30 years, clearly in recent years they have been attacking this area as never before," he noted.J.P. Morgan Securities broadline analyst Shari Schwartzman Eberts noted of the quarter, "For many department stores this was the year's best opportunity for upside, as inventory levels were the cleanest in 10 years and most had yet to cycle the selling, general and administrative expense reductions started in the second quarter last year." Eberts recommended that investors take their profits and run in most of the department store stocks.It's a different story for discounters, though. "Results should continue to look good, particularly for Wal-Mart, where it will cycle margin pressure from Kmart's irrational pricing" last year, she said."

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