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Wal-Mart Earnings Rise, Bullish on Apparel

Wal-Mart Stores Inc. posted higher first-quarter earnings and sales and said its apparel business is ready to "kick into high gear" with warmer spring weather.

Wal-Mart Stores Inc. posted higher first-quarter earnings and sales and said its apparel business is ready to “kick into high gear” with warmer spring weather.

This story first appeared in the May 14, 2008 issue of WWD.  Subscribe Today.

Earnings rose 6.9 percent for the quarter to $3.02 billion, or 76 cents a diluted share, from $2.83 billion, or 68 cents, a year ago. Revenues for the three months ended April 30 rose 10.3 percent to $95.3 billion from $86.41 billion.

Comparable-store sales at U.S. Wal-Mart stores rose 2.7 percent, the best showing in two years, thanks to increases in both traffic and the average purchase size.

But Wal-Mart might be an anomaly in these tough economic times. Macy’s Inc., J.C. Penney Co. Inc., Kohl’s Corp. and Nordstrom Inc. are all expected to report this week that the weakened consumer led them to lower earnings or losses last quarter.

“Apparel is already recovering and it’s being driven by the very successful introduction late last year of our Express for Less initiative and our emphasis on price points of $10 or less,” said Eduardo Castro-Wright, president and chief executive officer of the Wal-Mart division.

The company’s Express for Less program focuses on licensed merchandise, such as T-shirts with slogans.

“We are making progress in apparel and with help from the weather, this business unit and our seasonal business should kick into high gear,” said Castro-Wright.

This month Wal-Mart is rolling out Ocean Pacific apparel as an exclusive and is emphasizing both branding and price.

The launch is being supported by a print, radio and online marketing blitz featuring Kristin Cavallari, of “Laguna Beach” fame, and rocker Pete Wentz, among others. An OP wide-neck jersey T-shirt for juniors was priced at 97 cents on the chain’s Web site Tuesday.

“Their apparel business is clearly on the mend and it’s an improving trend,” said Craig Johnson, president of Customer Growth Partners, a New Canaan, Conn.-based consultancy.

So far, Wal-Mart’s pricing message seems to be lining up neatly with consumers’ economic wariness.

“Customers everywhere are concerned about the rising energy costs, food inflation, home values and a number of other factors tied to the global economy,” said Wal-Mart president and chief executive officer H. Lee Scott Jr. “Wal-Mart customers value our price leadership more than ever, especially as they try to stretch their money further.”

For the second quarter, Wal-Mart expects U.S. comp sales to be flat to up 2 percent and earnings of between 78 and 81 cents a share. Profits could come in below analyst expectations, which Yahoo Finance placed at 81 cents. Last year, second-quarter earnings totaled 72 cents a share.