BENTONVILLE, Ark.--With the expense of the Woolco and Pace acquisitions dragging on earnings, Wal-Mart Stores Inc. reported a third-quarter earnings increase of 13.4 percent, at the low end of Wall Street's consensus estimate.
Net earnings in the quarter rose to $588.2 million, or 26 cents a share, from $518.7 million or 23 cents. Wall Street had been expecting 26 to 27 cents in the latest quarter. Wal-Mart's stock, traded on the New York Stock Exchange, slipped 7/8 to close at 22 1/2.
Sales were up 21.4 percent to $20.4 billion from $16.8 billion.
Since the end of the second quarter, the company opened 45 discount stores, 32 supercenters--30 of which replaced discount stores--and three Value Clubs in Hong Kong.
In addition, since acquiring 122 Woolco units in Canada, the company has completed the conversion of 101 of them to Wal-Mart stores and expects to finish the others within a week, the company told analysts in a telephone conference call.
Wal-Mart acquired the Canadian units in March for $350 million. It purchased 99 Pace Membership Warehouse clubs from Kmart for $830.5 million in 1993.
According to Edward Johnson of Johnson Redbook Service, the company said that in the first year after conversion of a discount store to a supercenter, profits drop $500,000 to $750,000 per store. However, the supercenters more than make up for the shortfall in the second year.
Johnson is estimating earnings of 45 cents a share for the fourth quarter, up from 38 cents in the year-ago period. For 1995, he expects per-share earnings to be up 20 percent to $1.43.
Sales in the Canadian stores have been "excellent," the company said, adding that it plans to open six to eight new units next year. Wal-Mart said it believes the Woolco conversions, along with the Pace acquisition and the supercenter program, "will generate significant future earnings."
A breakdown by division shows that Wal-Mart discount store sales in the quarter ended Oct. 31 rose 19.5 percent to $14.7 billion with comparable store sales up 7.4 percent; Sam's Club sales jumped 30.3 percent to $4.7 billion, but same-store sales slipped 0.7 percent; the McLane wholesale business rose 11 percent to $1 billion.
For the nine months, net income rose 13 percent to $1.65 billion, or 72 cents. Sales were up 24 percent to $58 billion.
As of the end of the quarter, Wal-Mart had 1,983 Wal-Mart Stores, 119 supercenters, 437 Sam's Clubs, 122 Canadian Wal-Mart stores, three Hong Kong Value Clubs and 52 outlets in Mexico.
--Fairchild News Service

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