Wal-Mart tops retailers with record earnings

By Lorrie Grant
USA Today

Retailers across the spectrum, led by the biggest of them all, turned in strong quarterly results yesterday, showing the consumer is continuing to buy.

Discount chain Wal-Mart has 3,269 U.S. stores, including this one in Mililani. The company yesterday posted a record $1.65 billion in earnings. Advertiser library photo

The gain stems from higher traffic rather than higher transaction amounts. Much of it is market share taken from rival Kmart, which is under bankruptcy protection and liquidating hundreds of stores.

But Wal-Mart is also taking market share from supermarkets and regional department stores.

"Wal-Mart can put this double-digit growth in because they are going into new channels of retail," such as expanding grocery sales, says Emme Kozloff, retail analyst at Sanford C. Bernstein.

Sales at stores open at least a year were up 8 percent.

The Sam's Club warehouse division was a blemish to the quarter. While its revenue increased 12 percent, operating income was flat at $218 million.

"The primary reason for the shortfall in profitability was continued difficulty in controlling insurance expenses," says Linda Kristiansen of UBS Warburg.

Wal-Mart, the biggest retailer in the world, employs 1.3 million at 3,269 U.S. stores, including its small-format grocery chain, Neighborhood Market, and 1,186 stores abroad.

Consumers still leery about spending gave a boost to modestly priced apparel retailers. TJX Cos., the Framingham, Mass.-based operator of TJ Maxx and Marshalls, reported a 19 percent jump in earnings to $147 million, or 27 cents a share, from $123.7 million, or 22 cents. Sales were $2.6 billion, up 18 percent from $2.2 billion a year ago. Same-store sales rose 7 percent.

"In this economy, though it's coming back, consumers are still value-oriented and looking for bargains," says Sally Wallick at Legg Mason.