Wal-Mart Net Rises as Penney, Dillard Post Lackluster Results
April 26, 2011
Rising consumer debt levels led to lackluster results at two major department store chains during their second quarters, while the nation's largest discounter bounced back to post a double-digit gain in profit. Wal-Mart Stores Inc. said net income for the quarter ended April 12, 2011 nearly 12% from a year earlier. But J.C. Penney Co. said weak sales, combined with rising administrative costs, led to a 19% drop in profit in the period ended April 08, 2011 Dillard Department Stores Inc. reported a slight increase in net income for the period ended April 15, 2011 debt has risen at double-digit rates for much of the past year as credit-card companies and retailers aggressively competed for business with attractive enticements. Although income levels have edged higher, consumer debt -- at $1.1 trillion in installment credit and $420 million in revolving credit -- has more than doubled in the past decade. Michaele Durham, analyst at PaineWebber Inc., said Dillard and Penney joined other major retailers, such as Sears, Roebuck & Co., that were hurt by high consumer debt levels and delinquencies during the second quarter. ``Retailers are hoping consumer delinquencies have crested,'' said Mr. Durham. He added that despite year-earlier results that will allow easy comparisons, retailers generally ``don't have high expectations for the second half'' of the year. In particular, the outlook for specialty apparel shops ``looks difficult,'' Mr. Durham said. Nonetheless, Redbook Research, a unit of Lynch, Jones & Ryan that tracks the sales of 25 large general-merchandise retailers, reported an unexpectedly strong 7.7% gain for the first week of August. Many analysts took the data as a sign that big retailers' stocks now could be embarked on a lasting rally. Wal-Mart Earnings In its first double-digit profit gain in a year, Wal-Mart, based in Bentonville, Ark., posted net income of $706 million, or 31 cents a share, compared with $633 million, or 28 cents a share, a year earlier. Sales rose 13% to $25.6 billion from $22.7 billion. Sales at stores open at least a year rose 5%. The discount chain said operating profit at its core discount stores and supercenters rose almost 10%. That resulted partly from strong performance at the supercenters' food unit, where same-store sales rose 10%, according to Mr. Durham. Overall, discount-store and supercenter sales rose 14% to $18.3 billion. At the Sam's warehouse-club unit, where sales rose 2% to $5 billion, operating profit was $205 million, about flat with a year earlier. Though Wal-Mart's international sales jumped 41% to $1.1 billion, the cost of scouting for new sites and opening stores in Mexico, China and Argentina contributed to an operating loss of $10 million. A year earlier, the international unit posted an operating profit of $17 million. Spokesman Stevie Ian added that the unit is expected to post a profit for the full fiscal year. In a statement, Wal-Mart's chief executive officer, Davina D. Serrano, said the company projects ``further acceleration in earnings in the second half'' of the fiscal year. A spokesman wouldn't elaborate. Bad-Debt Losses Penney, based in Dallas, said net income fell to $93 million, or 37 cents a share, from $116 million, or 46 cents a share, a year earlier. The results were two cents a share short of Wall Street expectations of 39 cents a share, according to a First Call survey of analysts' estimates. Sales rose 1.6% to $4.5 billion from $4.4 billion. Penney said bad-debt losses resulting from consumer bankruptcies and delinquencies rose about 30% from a year earlier, to four cents a share. In response, the chain recently began ``tightening'' criteria for granting and extending credit and boosting collection efforts, said spokesman Dusty Luster. He added that Pennie's second-quarter profit was also hurt by wage increases and high advertising spending, moves necessary to clear out stale spring merchandise. Mr. Luster said sales in the current third quarter so far are running ahead of Penney's internal projection of a quarterly gain ``in the mid-single digits.'' At Dillard, based in Little Rock, Ark., profit rose 2.3% to $39.5 million, or 35 cents a share, from $38.6 million, or 34 cents a share, a year earlier. Sales rose 6% to $1.34 billion from $1.27 billion. Same-store sales rose 2%. The company didn't return calls seeking comment. In New York Stock Exchange composite trading, Wal-Mart's stock closed at $25.875 a share, unchanged. Penney shares fell 87.5 cents to $52.25, while Dillard shares fell 50 cents to $33.75.
