Wal-Mart Q4 Results Reflect Rational Price Strategy

BENTONVILLE, Ark. — Wal-Mart Stores here said last week that same-store sales at its U.S. formats rose 1.5% with higher traffic for the fourth quarter, the second consecutive period of positive comp sales and the fourth consecutive quarter of comp improvement.

“Every segment of our business is stronger today than it was a year ago,” Mike Duke, president and chief executive officer, said. “The plan [the company] put in place a year ago in the U.S. was the right plan. We listened to our customers, added back assortment and increased in-stock, and we brought back layaway.

“We churned the productivity loop, reduced expenses and invested the savings in lower prices. You can expect us to invest even more in lower prices this year.”

Analysts said last week they anticipate challenges ahead.

John Heinbockel, an analyst with Guggenheim Securities, New York, said Wal-Mart’s fourth-quarter results “signal ongoing and logical competitive rationality,” though the combination of disinflation, the generic wave and rising gas prices could cause comps to moderate during 2012.

Grocery comps in the U.S. during the fourth quarter were basically flat at 2.5%, compared with the third quarter, he said — benefiting from food-price inflation of 4%, which is causing consumers to trade down. He said he expects food inflation to be cut in half this year.

U.S. gross margin declined 13 basis points, “[which] is not indicative of a more aggressive approach to consumables pricing,” Heinbockel said, noting Wal-Mart has continued generally to raise consumables prices by about 2.2% over the past six months and 5.3% over the past year.

For the 13-week fourth quarter, net income on continuing operations rose 3.4% to $5.2 billion, and total sales climbed 5.8% to $122.3 billion, including $2.4 billion from the acquisition of Netto stores in the United Kingdom and Massmart in South Africa.

For the year, net income on continuing operations rose 2.7% to $4.2 billion, while sales rose 5.9% to $443.9 billion, including $4.7 billion from acquisitions.

Sales at Walmart U.S. rose 1.5% for the year to $264.2 billion, or 60% of the total; sales at Sam’s Club rose 8.8% to $53.8 billion, or 12% of the total; and international sales rose 15.2% to $125.8 billion, or 28% of the total.

U.S. sales in the fourth quarter rose 2.4% to $72.8 billion. Wal-Mart’s U.S. stores had positive traffic, William S. Simon, executive vice president and president and CEO of the U.S. division, said, which he attributed to the impact of price investments, expanded assortments and on-shelf availability.