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Originally published February 21, 2013 at 5:14 PM | Page modified February 21, 2013 at 5:14 PM

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Wal-Mart 4Q earnings ease investor concerns

Profit beat analyst forecasts and the company raised its dividends, though it signaled the first quarter may not be strong.

Bloomberg News

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NEW YORK — Shares in Wal-Mart Stores rose Thursday after fourth-quarter profit topped analysts’ estimates and the company raised its dividend, overcoming concerns that tax increases would hurt earnings this year.

Chief Executive Mike Duke is working to keep prices low amid delayed tax refunds and a 2 percentage-point increase in the Social Security payroll tax.

While the higher tax bite hurt Wal-Mart’s customers, the retailer is gaining market share, according to the minutes of an officers meeting obtained by Bloomberg. The company Thursday raised its annual dividend 18 percent to $1.88 a share to return cash to investors.

The dividend increase “signals the strong cash-flow nature of the business, management’s confidence in the business and their willingness to enhance shareholder value,” Brian Yarbrough, an analyst at Edward Jones in St. Louis, said Thursday in an email. Yarbrough had forecast a 12 percent increase in the dividend.

Wal-Mart said fourth-quarter profit rose to $5.61 billion, or $1.67 a share, from $5.16 billion, or $1.50, a year earlier, beating analyst estimates of $1.57 a share.

The profit results and higher dividend helped ease concern over first-quarter and full-year forecasts that trailed some analysts’ estimates.

Wal-Mart forecast first-quarter earnings per share of $1.11 to $1.16. Analysts have projected $1.19, the average of 18 estimates compiled by Bloomberg. Per-share profit for the full year ending January 2014 is forecast between $5.20 and $5.40 a share. The average of 25 analysts estimates compiled by Bloomberg was $5.39 a share.

The company, which is being investigated for potential violations of the Foreign Corrupt Practices Act, said costs associated with the investigations and compliance matters would be as much as $45 million in the current quarter.

First-quarter sales at stores open at least a year are projected to be little changed because of slower sales in the first few weeks of the quarter, Bill Simon, Wal-Mart U.S. president and CEO said in Thursday’s statement.

“February sales started slower than planned, due in large part, to the delay in income-tax refunds,” Simon said. “We continue to monitor economic conditions that can impact our sales, such as rising fuel prices, changes in inflation and the payroll-tax increase.”

About $19.7 billion more in tax refunds had been delivered to consumers by this time last year, according to an analysis prepared by Wal-Mart’s Global Customer Insights & Analytics division.

The tax increase that took effect this year may cause seven out of 10 Americans to curtail spending, especially on big-ticket items such as cars, according to a survey the National Retail Federation released Thursday.

About 73 percent of consumers said their spending plans are taking a hit, the trade group said, citing a survey of 5,185 people conducted from Feb. 5 to Feb. 13. More than a third said they’ll reduce how much they dine out and 25 percent said they plan to cut back on small luxuries such as manicures and trips to coffee shops.

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