Retailer first for Wal-Mart: discounter nets over $1B

Discount Store News, March 12, 1990

Retailer First For Wal-Mart: Discounter Nets Over $1B

BENTONVILLE, Ark. -- The Wal-Mart juggernaut was on a roll last year, with the discounter becoming the first general merchandise retailer to report over $1 billion in net income.

The company's unaudited financial report showed sales in the fiscal year ended Jan. 31 increased 25 percent to $25.8 billion from $20.6 billion while net income grew even faster, jumping 28.5 percent to $1.075 billion from $837 million.

Wal-Mart's $1 billion bottom line surpasses the best earnings reported by Sears retail operation, $905.2 million in 1984, and K mart, $802.9 million last year.

Wal-Mart's sales, meanwhile, positions the discounter to likely become the top retailer in volume within the next two years. Last year Sears merchandise group (which includes credit card and foreign revenues), reported $33.6 billion in sales, while K mart's volume including Canada) was $29.1 billion. These figures were higher that Wal-Mart's volume (which is just United States revenues), but the two chains aren't growing sales as rapidly as the Bentonville behemoth.

Trade observers expected Wal-Mart to reach $36 billion to $37 billion in sales by the end of next year to surpass Sears and K mart. Wal-Mart's growth will be spurred by its entry into new regions this year, California with discount stores and a major invasion of the Northeast with Sam's Wholesale Clubs.

Overall, the company plans to open more stores in 1990 than in any prior year. In 1989, it unveiled 143 Wal-Marts to reach 1,402 stores, and 18 Sam's to hit 123 membership warehouses.

Wal-Mart's sterling performance is evident from a number of other measurements.

The company's tight control on expenses and operations enabled it to maintained gross margin at 22.2 percent, much less than most other general merchandise retailers. This figure, which averaged at least 10 percentage points less than most competitors, reflects the growing impact that Sam's continues to make on the company's business. The wholesale club arm--with its 10 percent average gross margin--accounted for about 20 percent of the company's sales.

Wal-Mart was also able to trim SG&A (as a percentage of sales) percent from 15.83 percent to 15.77, also one of the lowest figures in retailing.

The final measurement: Wal-Mart's net profit margin went to 4.14 percent from 4.03 percent.