Wal-Mart, May Stores see profits rise; Penney falters

0 Comments | Deseret News (Salt Lake City), May 14, 2003 | by Anne D'Innocenzio AP business writer

NEW YORK -- Wal-Mart Stores Inc., bolstered by its international results, said Tuesday its earnings rose 14 percent in its first quarter, while two other major retailers reported weak profits for a period hobbled by conflict in Iraq, cool and rainy weather and job losses.

May Department Stores Co. posted a 3 percent profit increase for the quarter, while J.C. Penney Co. Inc. said its earnings skidded 29 percent below a year ago.

Wal-Mart's earnings matched Wall Street expectations, but May missed analysts' consensus forecast. Penney's results beat expectations.

Revenue at all three retailers, particularly at Wal-Mart, fell short of analysts' expectations for the quarter. Penney's shares rose more than 5 percent, while shares of May and Wal-Mart slipped about 2 percent.

Retailers are hoping the worst is behind them, but they say they face challenges.

"We do not see the business deteriorating," said Lee Scott, president and CEO of Wal-Mart, in a pre-recorded call to investors Tuesday. "We see, if anything, the next quarter being similar to the quarter we just finished."

Wal-Mart Stores Inc.

The world's largest retailer earned $1.86 billion, or 42 cents per share, in the three months ended April 30, compared with $1.63 billion, or 37 cents per share, in the year-ago period.

Analysts polled by Thomson First Call estimated the company would earn 42 cents per share.

Wal-Mart, based in Bentonville, Ark., noted that its results include the effects of an accounting change regarding money received from suppliers, a change that reduced earnings by $101 million, or 2 cents a share.

The company said that second-quarter earnings will be anywhere from 49 cents to 51 cents per share. Analysts expected earnings of 51 cents a share.

Sales rose 9.7 percent to $56.72 billion in the first quarter, compared with $51.71 billion in the year-ago period. But that was short of analysts' expectations of $60.69 billion.

The company said that sales at stores open at least a year -- known as same-store sales -- were up 2.2 percent from a year ago. Same-store sales are the best indicator of a retailer's health.

The Wal-Mart discount store division showed an increase of 2.1 percent, and Sam's Club sales were up 2.2 percent.

Shares of Wal-Mart fell $1.21, or 2.1 percent, to close at $55.49 in trading on the New York Stock Exchange.

J.C. Penney Co.

The retailer, based in Plano, Texas, earned $61 million, or 20 cents per share, for the 13 weeks ended April 26, compared with $86 million, or 29 cents per share, a year earlier.

Analysts polled by Thomson First Call expected 18 cents per share, reduced last month after Penney lowered its forecast from the low 30- cents range to between 18 cents and 23 cents per share.

Sales were $7.49 billion, compared to $7.73 billion last year. The figure fell short of analysts' projections of $7.59 billion.

Same-store sales fell 4.9 percent at Penney department stores and 1.1 percent at Eckerd drug stores.

Catalog sales continued to fall, decreasing 11.1 percent. Internet sales continued a growth trend, increasing more than 25 percent during the quarter.

"The past three months have represented one of the most difficult retailing environments in recent memory," said Allen Questrom, chairman and CEO of Penney.

Penney has been slashing costs, including store closings and layoffs over the past two years.

"Although I am disappointed with the company's execution, results for the first quarter should not detract from the significant progress that we have made in improving the fundamentals of our business over the past two years," Questrom said in a statement.

He added that the company is beginning to "see some signs that the environment may be improving." Consequently, Penney is not changing its earnings outlook for the second quarter or for the second half of the year. And Questrom added that if the retail environment does improve, the company believes that it could still achieve its full- year earnings goal.

Analysts expect earnings of $1.39 per share for the year.

In trading on the NYSE, Penney shares rose 96 cents, or 5.4 percent, to close at $18.85 a share.

May Department Stores

The St. Louis-based operator of such stores as Lord & Taylor, Meier & Frank and Famous-Barr said it earned $72 million, or 23 cents per share, in the three months ended May 3 compared with $70 million, or 23 cents per share, in the year-ago period.

The latest earnings include a tax credit of $31 million, or 10 cents per share, for the resolution of various federal and state income-tax issues.

Excluding the gain, May earned 13 cents a share. Analysts surveyed by Thomson First Call expected earnings of 15 cents per share.

First-quarter sales fell 7.2 percent, to $2.87 billion, from $3.10 billion a year ago. But analysts were looking for sales of $3.07 billion.

Sales at stores opened at least a year were down 8.8 percent. May operates 445 department stores, 235 After Hours Formalwear stores, 183 David's Bridal stores and 10 Priscilla of Boston stores. The company has stores in 45 states, the District of Columbia and Puerto Rico.