Recession or not, penny-pinching plays to Wal-Mart Stores Inc.'s strength as the retail giant posted a 4 percent profit gain on an 8.3 percent sales increase.
For the quarter ended Jan. 31, net income grew to $4.1 billion, or $1.02 a diluted share, from $3.94 billion, or 95 cents, a year earlier on sales that swelled to $106.27 billion from $98.09 billion. U.S. same-store sales increased 1.7 percent, excluding the impact of fuel sales at Sam's Club.
The results reflect Wal-Mart's success at returning to its low-price roots. And so far, appealing to the pocketbook in uncertain economic times seems to be working in the store's apparel department.
Early spring sales of Wal-Mart's private label apparel program, where key items cost $10 or less, were "very promising as a leading indicator" for the first half, said the company.
If the trend holds up and Wal-Mart shoppers also respond positively to the forthcoming Ocean Pacific and L.E.I. introductions, apparel might make its way out of the doghouse at the world's largest retailer.
The chain is also putting some of its considerable financial might behind what it sees as "growth businesses," including athletic apparel and shoes and licensed merchandise.
The emphasis on low prices marks a return to Wal-Mart's bread-and-butter message, epitomized by its "Save Money. Live Better." tag line, and a shift away from trendier offerings, such as Metro 7, which was rolled out aggressively, but didn't resonate with shoppers.
"The price leadership strategy we put in place at the beginning of the [fiscal] year was exactly the right strategy for our customers around the world in a tough economic environment," stated Lee Scott, the firm's president and chief executive officer.
Calling Wal-Mart "A stock for tough times," Banc of America Securities analyst David Strasser wrote in a research note that the key to the quarter was improved gross margins despite a focus on price.
"This is about better perception of pricing, not aggressive price cuts," said Strasser. "They are managing [their] mix better and, most importantly, sourcing continues to be very accretive to margins. We have to imagine vendors not exactly sharing the joy of these gross margins."Wal-Mart is also accustomed to sailing against economic headwinds.
"The [Wal-Mart] customer has been in a recession for over five years, and the company is better adjusted for this slowdown than other retailers," said Strasser. "They are benefiting from trade down at a time when [Target] is struggling to adjust its cost structure."
For the full year, Wal-Mart delivered profits that gained 12.8 percent to $12.73 billion, or $3.13 a share, on an 8.6 percent rise in sales to $374.53 billion.
The retailer's outlook calls for earnings from continuing operation of 70 to 74 cents a share in the first quarter and $3.30 to $3.43 for all of fiscal 2009.
Craig Johnson, president of Customer Growth Partners, applauded Wal-Mart's turnaround. "But turning around a company this big is like turning around the Queen Mary," Johnson said. "It has a large turning radius, and despite the great results to date, two major components are still a work in progress. Domestically, apparel and home are improving, but still are lagging."
Johnson said on the international front, while "Brazil, Mexico and the U.K. are real stars [for Wal-Mart], and China is an emerging star," Wal-Mart Japan's Seiyu still needs work.
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews