Wal-Mart Stores Inc., the world’s largest retailer, said fourth-quarter profit rose more than analysts estimated as discounts drew shoppers. Home Depot Inc. had a record drop because falling U.S. home sales cut demand.
Wal-Mart’s net income climbed 9.8 percent to $3.94 billion, or 95 cents a share, exceeding the 90-cents-a-share estimate of analysts surveyed by Bloomberg. Profit at Home Depot, the world’s largest home-improvement retailer, slumped 28 percent to $925 million, or 46 cents a share, trailing estimates.
Wal-Mart cut prices on toys and electronics to boost sales at stores open at least a year by 1.6 percent. Home Depot Chief Executive Officer Frank Blake, who took over from Robert Nardelli after his ouster seven weeks ago, said today that he’s focused on adding market share in the face of competition from Lowe’s Cos.
“Lowe’s continues to take share from them pretty aggressively,” said Peter Sorrentino, a portfolio manager at Cincinnati-based Huntington Capital Management. Wal-Mart “is showing some very meaningful progress.” Home Depot’s profit lagged behind the average estimate of analysts surveyed by Bloomberg, who had predicted 51 cents a share.
Wal-Mart chief H. Lee Scott re-emphasized the Bentonville, Arkansas-based company’s “low-price” message after failing to lure consumers with exclusive lines of clothing.
Sales in the period, which ended Jan. 31, increased 11 percent to $98.1 billion, less than the $98.5 billion on average estimated by analysts. Including membership fees and other income, revenue was $99.1 billion. Profit a year earlier was $3.59 billion, or 86 cents a share.
“These results were very solid,” said Sorrentino, whose firm has $6.5 billion in assets under management, including Wal- Mart shares.
Wal-Mart forecast first-quarter profit from continuing operations of 68 cents to 71 cents a share. For the year, the company projected earnings of $3.15 to $3.23. Analysts surveyed by Bloomberg estimated 68 cents for the first quarter and $3.21 for the year.
Wal-Mart promoted itself during the end of 2006 as the lowest-price holiday destination. Treasurer Charles Holley said that’s a message the company will continue to stress.
“If you look at Wal-Mart historically, they are known as being the low-cost retailer,” said Steven Baumgarten, an analyst at PNC Wealth Management in Philadelphia, with $54 billion in assets including Wal-Mart shares. “They have done a great job with that.”
At Home Depot, sales for the three months ended Jan. 28 rose 4 percent to $20.3 billion. A year earlier, net income was $1.29 billion, or 60 cents a share.
Home Depot’s retail sales dropped for the first time in four years, while sales in older stores fell for a third straight quarter. New CEO Blake called the retail unit’s performance “disappointing.” He plans to trim discounts to boost profit while hiring more sales staff in stores to improve service.
“The challenge for Home Depot is that fundamentals are still weak, very weak, and are continuing to decelerate and may be that way for several quarters,” Arun Daniel, a senior analyst at ING Investments LLC in New York, said. The firm has $40 billion in assets, including Home Depot stock.
