News

Wal-Mart increases profit outlook

BY Mike Troy

BENTONVILLE, Ark. Despite ongoing concerns about the health of the U.S. and global economies, Wal-Mart today increased its full-year profit forecast after reporting record second-quarter results.

Total sales increased 10.4 percent to $101.6 billion and profits increased 9.3 percent to $3.385 billion, during the second quarter ended July 31. Same-store sales for the period increased 4.6 percent, excluding fuel sales, at Wal-Mart’s U.S. stores division and increased 3.7 percent, excluding fuel sales, at the Sam’s Club division.

“We have a great story to tell for this year’s second quarter,” said president and chief executive officer Lee Scott. “We continue to deliver on our mission of saving people money so they can live better. Each operating segment contributed to the quarter’s record sales.”

Wal-Mart’s great story also included mention of the health and wellness business as one of the six major merchandising units Scott said continues to gain market share in the United States.

“Our pharmacy prescription business has sustained high single-digit comparable-store sales growth,” said U.S. stores division president Eduardo Castro-Wright. “The $4 and $10 prescription program continue to drive pharmacy traffic. The $10, 90 day prescription offering resulted in a high double-digit fill rate increases.”

Other pharmacy details shared included what Castro-Wright called a, “substantial increase is pharmacy customers experience and faster checkout scores. The $4 or less price on more than 1,000 OTC products also generated strong customer response.”

Another area of emphasis on the call was about operational improvements that are driving improved financial results. Profits increased 14.6 percent to $0.86 per share from $0.75 the prior year, exceeding the company’s guidance that had been increased to a range of $0.82 to $0.84 on July 10. The company’s outlook for the third quarter calls for same store sales in a range of 1 percent to 2 percent and earnings per share of $0.73 to $0.76. Despite the modest outlook for third quarter comps, Wal-Mart boosted its full year earnings guidance to a range of $3.43 to $3.50 from guidance issued at the end of the last fiscal year of $3.30 to $3.43.

According to Scott, effective inventory management, especially in the United States and markets share gains in each of the company’s six major merchandising units contributed to an improved operational performance.

“Our company continues to manage cash flow in a way that will gives us the opportunity to participate in things that will benefit Wal-Mart long-term,” Scott said. “The combination of our strong operating performance coupled with strong capital efficiency allowed the company to report free cash flow through the first six months of almost $5 billion.”

Wal-Mart has been spending less money on opening new stores and also eased up on share repurchase activity during the second quarter. Wal-Mart added 73 stores worldwide and ended the second quarter with a total of 4,224 stores in the United States, including 2,572 supercenters, 915 discount stores, 594 Sam’s Clubs and 143 Neighborhood Markets. Internationally, Wal-Mart operates 3,192 stores in countries such as Mexico (1,074), Japan (392), the United Kingdom (346), Brazil (318), Canada (309), China (206), Costa Rica (154), Guatemala (147), El Salvador (74), Puerto Rico (55), Honduras (47), Nicaragua (46) and Argentina (24)

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

TRENDING STORIES

News

CVS Caremark ratings affirmed by S&P

BY Drew Buono

NEW YORK The financial market intelligence company Standard & Poor’s has affirmed its ratings on CVS Caremark.

What this means is that the financial ratings company is okaying CVS’ acquisition of Long Drug Stores, which was announced yesterday.

“The rating affirmation is based on CVS Caremark’s track record in integrating acquired retail stores, its strong cash flow generation and the expected debt reduction to restore credit measures to levels more appropriate for the rating,” said Standard & Poor’s credit analyst Ana Lai.

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

TRENDING STORIES

News

Hawaii won’t say Aloha to Longs name

BY Doug Desjardins

WALNUT CREEK, Calif. Assuming the CVS acquisition goes through as planned later this year, Longs Drug will disappear from the retail landscape in California after a 70-year run but that won’t be the case in Hawaii.

“We will leave the Hawaiian market as Longs,” said CVS chairman and chief executive officer Tom Ryan. “Hawaiians see Longs as a homegrown chain and it’s really a stand alone market.”

Longs opened its first store in Hawaii in 1954 and it’s dominated the state since then. It has 39 stores there, with several more on the way, and is far and away the No. 1 player in the market, though Walgreens opened its first store there last year and is expanding.

But in the more competitive atmosphere of California, CVS plans to convert the more than 450 stores to its own brand. “California will become a CVS market,” said Ryan, adding that the conversion should be complete by the end of 2009.

CVS already has a sizeable presence in California, courtesy of its purchase of 335 stand-alone Sav-On stores in 2006, and the addition of Longs stores will make it the top drug retailer in the state with more than 830 stores. But what remains to be seen is how much overlap there will be in some markets, particularly in Southern California, though Longs Drug chief executive officer Warren Bryant suggested the merger shouldn’t produce much in the way of cannibalization.

“There’s very little geographic overlap,” said Bryant. “The only two broad markets we have (with CVS)—Southern California and Las Vegas—largely have a complimentary footprint.”

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

TRENDING STORIES