Wal-Mart May Say Fourth-Quarter Profit Rose While Growth Slowed

Wal-Mart Stores Inc., the world's largest retailer, may say fourth-quarter profit rose on the smallest sales increase in a year as the company reduced prices during the holidays to attract customers.

Wal-Mart will probably report on Feb. 20 fourth-quarter profit of 90 cents a share, up from 84 cents a year earlier, according to the average estimate of 16 analysts surveyed by Bloomberg. Sales may have risen 11 percent to $98.7 billion.

The retailer, based in Bentonville, Arkansas, offered discounts on food, toys and electronics in the U.S. after an attempt to lure customers with exclusive lines of clothing failed. Chief Executive Officer H. Lee Scott shuffled top executives after sales growth at older U.S. stores slumped to the lowest rate since at least 1980.

``When you start to move into other areas, Wal-Mart may not be at the top of their game,'' said Steven Baumgarten, an analyst at PNC Wealth Management in Philadelphia, with $54 billion in assets including Wal-Mart shares. ``They are known as being the low-cost retailer.''

Shares of Wal-Mart rose 49 cents, or 1 percent, to $48.36 yesterday in New York Stock Exchange composite trading. Last year, the stock declined 1.3 percent, compared with a 3.8 percent gain for Target Corp., the second-largest discount chain.

Wal-Mart has about 3,300 discount stores and supercenters in the U.S. Scott wasn't available for an interview, spokeswoman Mona Williams said.

Sales Growth

Sales at stores open at least a year increased about 2 percent at Wal-Mart in the year through January, the smallest gain in at least 27 years. Stores tracked by the New York-based International Council of Shopping Centers had a 3.7 percent comparable-store sales gain for 2006.

Target has outpaced Wal-Mart in sales at stores open at least a year, beating its larger rival in 12 of the 15 previous quarters by appealing to shoppers with designer clothing and housewares from Isaac Mizrahi and Proenza Schouler. Minneapolis- based Target reports its fourth-quarter results Feb. 27.

``Target realized a long time ago, `We're not going to win on price with Wal-Mart,''' Baumgarten said.

To lure shoppers for more than basics, Wal-Mart has upgraded stores and added higher-priced electronics, clothing and home goods.

Personnel Shifts

Wal-Mart yesterday named Walmart.com CEO Carter Cast to direct U.S. strategy. He joins newly appointed merchandising chief John Fleming, a former executive at Target, and U.S. stores head Eduardo Castro-Wright as they develop plans to tailor products to specific groups of stores and shoppers such as Latinos and a segment the company calls ``suburban affluent.''

The company has had ``mixed'' success selling higher-priced and more trendy clothing and home goods, Scott told analysts at a conference in October. It's done well with consumer electronics, he said.

Wal-Mart has said it conducted ``extensive'' customer research a year ago and will now use that data to hone its store offerings.

Sales Strategy

The company has said it misstepped with Metro 7, a more fashionable women's clothing line introduced in October 2005, and is removing the collection from as many as 900 of the 1,500 stores that carried it.

There are limits to what Wal-Mart can do to boost sales in the U.S., said David Abella, an analyst at Rochdale Investment Management in New York, with $2.2 billion in assets including Wal-Mart shares.

Citigroup Inc.'s Deborah Weinswig, Institutional Investor's top-ranked retail analyst, estimates that U.S. same-store sales will rise 2.1 percent next year.

Wal-Mart has saturated the U.S. with its stores, Abella said, leading investors to temper expectations for growth.

``No one's going to expect 5 percent,'' said Abella.

source:www.bloomberg.com