NEW YORK — Oil prices may have reached a 21-year high Thursday but that didn’t dent the optimism of the nation’s top two discounters, which cited strong initial demand for back-to-school items as good news for the future.
Both Lee Scott, president and chief executive officer of Wal-Mart Stores Inc., and Robert Ulrich, chairman and ceo of Target Corp., were upbeat in their comments about the second half as they discussed in separate conference calls second-quarter results posted on Thursday.
Meanwhile, Kohl’s Corp., which reported second-quarter results after market, said income for the three months ended July 31 jumped 39 percent, citing significant progress on its 2004 initiatives. The company was hopeful that it will return to positive comparable-store sales increases in the third quarter.
Wal-Mart said income for the quarter ended July 31 rose 16.1 percent to $2.65 billion, or 62 cents a diluted share, from $2.44 billion, or 56 cents, in the year-ago period. Total revenues rose 11.3 percent to $69.72 billion from $62.64 billion, which included a 10.2 percent gain in Wal-Mart stores to $46.91 billion from $42.57 billion. Wal-Mart also operates the warehouse division Sam’s Club, as well as international operations. Total U.S. comps sales rose 4.1 percent, representing a 3.2 percent jump in same-store sales for Wal-Mart stores and an 8.8 percent increase in comps for Sam’s Club.
In the six months, income rose 11.9 percent to $4.82 billion, or $1.13 a share, from $4.31 billion, or 98 cents, a year ago. Total revenues rose 12.7 percent to $134.49 billion from $119.4 billion.
Scott told Wall Street analysts during the call, “Each of our divisions grew earnings faster than sales and we exceeded our total shareholder return target. Our improvement in operating income was due to increases in gross margin. This did not come from raising prices.”
He disclosed the improvement came from lower costs, particularly from global sourcing initiatives and a reduction in the amount of markdowns.
“In the Wal-Mart stores division, apparel had a good quarter. This is a marked improvement over last year and markdowns were down for the quarter. Initial response to back-to-school is encouraging and bodes well for the second half of the year,” Scott said.
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