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Wal-Mart beats 4Q estimate
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February 15, 2000: 6:50 p.m. ET
Strong overseas sales gains, solid U.S. growth power retailer's earnings
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NEW YORK (CNNfn) - Wal-Mart Stores Inc., the world's largest retailer, edged past earnings expectations Tuesday for the fiscal fourth quarter to post a record profit for the year. The company also brushed off reports that increasing costs could dampen the possibility of a second consecutive record year.
The company posted net income of $1.9 billion, or 43 cents a diluted share, for the quarter ended Jan. 31. Analysts surveyed by earnings tracker First Call expected the retailer to earn 42 cents a share in the period. That estimate had been raised from an initial forecast for the quarter of about 40 cents a share.
When asked whether rising costs would affect Wal-Mart's ability to post a second consecutive record year, Les Copeland, a company spokesman, said the company stood fast behind new Chief Executive Officer Lee Scott's statements Tuesday that it would.
Profit rose 23 percent from the year-earlier quarter, when Wal-Mart (WMT: Research, Estimates) posted net income of $1.6 billion, or 35 cents a diluted share.
Strong growth outside the United States
Sales increased 26 percent to $51.4 billion in the quarter, driven by a 164 percent jump in sales outside the United States. Those sales accounted for 19 percent of the company's total revenue in the quarter.
Much of the gain was due to the company's acquisition of the British Asda Group PLC during the year. Excluding that purchase, sales outside the United States increased 29 percent in the quarter.
The company also posted solid gains in its various U.S. operations. Its core Wal-Mart division saw revenue grow 12.6 percent in the quarter, while its Sam's Club wholesale stores' sales grew 7.4 percent. Average purchases by U.S. consumers grew despite a cut in prices.
 CEO Scott told analysts Tuesday that the company expects another record year, despite rising costs for raw materials such as oil, a strengthening of Asian currencies and increased labor costs.
The company also intends to continue increasing its capital spending in the current fiscal year to $7 billion, compared with $5.9 billion in fiscal year 2000 and $3.7 billion in fiscal year 1999. The increased spending comes from new distribution centers and 165 additional "supercenters" this year. That would increase the number of those outlets, which also sell groceries, by more than a fifth.
Analysts shared Scott's optimism about being able grow and to continue rolling back prices, but doubted whether the company could manage a repeat of last year.
"I do think we'll see another record year, but I do think earnings growth will slow relative to last year," said Sally Wallick, an analyst with Legg Mason, in an interview on CNNfn Tuesday. "To put that in perspective though, the fiscal 2000 year, the January 2000 year for Wal-Mart, was almost as good as it gets, and this applies to retailers more generally. The economy was great; the consumer felt terrific. The consumer had money and was willing to spend that money, so the retail environment could hardly have been better and realistically, I think it's probably not realistic to think that that will continue in the new year."
Wallick also said she thought Wal-Mart would be able to continue rolling back prices, and will continue to expand its international presence.
For the fiscal year, the company posted earnings before special charges of $5.6 billion, or $1.25 a share, up from $4.4 billion, or 99 cents a share, in the prior year.
Net income, including a change in accounting practices, came to $5.4 billion, or $1.21 a share, in fiscal 2000. Revenue rose to $165.0 billion from $137.6 billion in the prior year.
Sign of strong retail earnings ahead
Wal-Mart is the first major retailer to report results for what is expected to be a very good quarter and year for retailers.
"We've been through a very good Christmas so we should have very good earnings," said Bernard Sosnick, analyst with Fahnestock & Co.
But despite the good results Tuesday, shares of Dow component Wal-Mart (WMT: Research, Estimates) slumped, closing down 7/8 to 58. That's up from a morning low of 55. Sosnick said there was no bad news hidden in the report responsible for the sell-off, however.
"It's not a Wal-Mart story; it's a story about what happens to stock trading at 40-to-50 times earnings," he said. Wal-Mart's price-earnings ratio is 49.5. 
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