WAL-MART SALES, EARNINGS SOAR IN FOURTH QUARTER

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NEW YORK--Continuing its meteoric growth, Wal-Mart Stores' sales rose 20 percent to $24.4 billion while earnings grew 18.6 percent and topped $1 billion in the fourth quarter.
And apparel is playing a bigger role. Wall Street analysts said America's price-sensitive consumers are shopping Wal-Mart more frequently for apparel. The chain's drive to beef up its women's wear will spur the world's largest retailer well passed the anticipated $100 billion volume level this year. (See related story, page 16.)
"The earnings were very powerful," said David Poneman, analyst at Sanford C. Bernstein & Co. "Wal-Mart will be a $100 billion-a-year company in 1995 and the fact it is still growing at a high-teens rate is staggering."
The mass retailer earned $1.03 billion, or 45 cents a share, in the quarter, up 18.6 percent from $868 million, or 38 cents, a year earlier. Sales in the year-ago quarter totaled $20.4 billion.
David Glass, president and chief executive officer, said in a statement that pretax earnings and sales both grew at 20 percent in the quarter, and noted that the growth came in "a highly competitive environment despite significant start-up expenses and investments in acquisitions and international markets," including the Woolco chain in Canada.
For the full year, earnings were up 14.9 percent to $2.7 billion, or $1.17, from $2.3 billion or $1.02. Sales grew 22.5 percent to $82.5 billion from $67.3 billion.
Glass noted that although earnings growth for the year did not track sales, "earnings in comparable stores and clubs increased at a rate in excess of their sales growth."
Wal-Mart continues to steal market share from discounters, particularly in women's apparel. Between 1987 and 1994, Wal-Mart's share of total discounter sales more than doubled from 20.1 percent to 41.6 percent, according to Isaac Lagnado, publisher of Tactical Retail Monitor.
Kmart Corp., the nation's second-largest discounter, slipped from 34.5 percent market share to 22.7 percent. Target, the third-largest discounter, moved from 8.3 percent to 10 percent market share, Lagnado estimated.
Among discounters, Wal-Mart's market share in women's rose from 17.5 percent in 1989 to 28.1 percent last year, a gain of 10.6 percentage points, Lagnado said. Kmart fell three percentage points to 23.9 and Target was up 0.9 to a 9.7 percent share.
Robert F. Buchanan, an analyst at NatWest Securities, said that even though Wal-Mart is coming off a relatively low volume base in apparel, "They're doing a better job at trend identification and generally providing fashion."
"Wal-Mart, given its razor-sharp pricing, is having a very strong appeal to this price-sensitive customer," he said. "Their expense-to-sales ratio is so low they can work on a low gross margin."
But Buchanan said he believed the discounter's inventory position at the end of the year was "too high." "They're up 27 percent at the end of the year in their inventory, where as I am only looking for a 20 percent sales increase for the first quarter and the year," he said.
He attributed that to the opening of three distribution centers in 1994 and putting merchandise displays on the selling floors earlier.
Wal-Mart also showed some erosion in its expense and return on sales ratios, according to analysts.
In the quarter, operating expenses rose to 14.33 percent of sales from 13.99 percent a year ago and after-tax return on sales slipped to 4.21 percent from 4.26 percent.
For the year, expenses increased to 15.6 percent from 15.3 percent and return on sales eased to 3.3 percent from 3.5 percent.
Poneman noted that Wal-Mart recently absorbed two multibillion dollar companies that were losing money, Pace Membership Warehouse, which had sales of $3 billion and Woolco Canada with sales of about $1.5 billion.
Wal-Mart stock gained 3/8 to 23 3/4 in trading Tuesday on the New York Stock Exchange.
--Fairchild News Service

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