Wal-Mart, TJX Profits Rise

Retailers wary of the consumer for second half.

Both Wal-Mart Stores Inc. and The TJX Cos. Inc. posted gains in second-quarter income, prompting them to raise third-quarter guidance.

This story first appeared in the August 18, 2010 issue of WWD.  Subscribe Today.

At Wal-Mart, income for the three months ended July 31 rose 3.4 percent to $3.6 billion, or 97 cents a diluted share, from $3.48 billion, or 89 cents, in the year-ago quarter. Diluted earnings per share were one cent above the First Call consensus of 96 cents, and at the high end of the discounter’s guidance range of between 93 cents and 98 cents.

Total revenues were up 2.8 percent to $103.73 billion from $100.88 billion, which included a 2.8 percent rise in sales to $103.02 billion from $100.17 billion. The balance of the revenue gain was primarily from membership income from Sam’s Club. Comparable-store sales for the Wal-Mart U.S. division were down 1.8 percent.

For the six months, income rose 6.4 percent to $6.9 billion, or $1.84 a diluted share, from $6.48 billion, or $1.65, last year. Total revenues were up 4.3 percent to $203.54 billion from $195.09 billion.

“We continue to focus on our priorities of growth, leverage and returns….We are raising our full-year guidance to a range of $3.95 to $4.05,” said Mike Duke, president and chief executive officer. The previous guidance range was between $3.90 to $4 a share.

For the third quarter, the discounter forecast diluted EPS from continuing operations attributable to Wal-Mart at between 87 cents and 91 cents.

Duke added that the “slow economic recovery will continue to affect our customers, and we expect they will remain cautious about spending.” He emphasized that Wal-Mart is committed to its mission of “saving people money so they can live better.”

In a conference call with Wall Street analysts, Duke said the second quarter was a “challenging” one for the Wal-Mart U.S. unit, and that the top priority for the Bentonville, Ark.-based discounter “remains improving top line sales and customer traffic.” Wal-Mart has shaken up the management at its U.S. unit, with former president and ceo Eduardo Castro-Wright stepping aside for a new role at the group and John Fleming, its chief merchandising officer, leaving the company.

William Simon, Wal-Mart U.S.’ current president and ceo, told analysts, “The deep rollbacks we featured in May and June did improve price impression, but they did not generate the level of top-line sales we’d hoped for. In July, we put the emphasis back on our core [everyday low price] model.”

Simon also said the retailer is reviewing its merchandise mix with suppliers and plans on “restoring thousands of products to our assortment [as well as] adding items.” As for apparel, Simon said that overall comps for the category “remain negative [but we are] focused on improvement in our apparel business and believe we’ll see better comps by the fourth quarter.”

As for The TJX Cos. Inc., income for the three months ended July 31 rose 16.6 percent to $305 million, or 74 cents a diluted share, from $261.6 million, or 61 cents, a year ago. The company’s EPS beat analysts’ consensus estimate of 73 cents by one cent, according to Yahoo Finance. Sales rose 6.8 percent to $5.07 billion from $4.75 billion, with comps rising 3 percent.

For the six months, income jumped 35.2 percent to $636.4 million, or $1.54 a diluted share, from $470.8 million, or $1.09, last year. Sales climbed 10.8 percent to $10.08 billion from $9.1 billion.

The Framingham, Mass.-based firm, which operates the TJ Maxx, Marshalls and HomeGoods name plates, also raised its full-year fiscal 2011 EPS guidance to between $3.28 to $3.38, and said third-quarter EPS is forecast at between 86 cents to 91 cents.

“Customer traffic continued to increase significantly over large increases last year. In addition, we will be spending a larger portion of our marketing dollars in the second half of the year, when we face very challenging year-over-year comparisons, which represents a substantial increase over last year,” said Carol Meyrowitz, president and ceo.