| NEW YORK
NEW YORK Wal-Mart Stores Inc (WMT.N) reported a higher-than-expected rise in February same-store sales and said it was raising its dividend due to the strength of its business, sending its shares 3 percent higher.
The world's largest retailer gave an overall boost to retail sales in February and proved it is pulling further ahead of rivals like Target Corp (TGT.N).
Target posted a same-store sales decline in February, while discounter Family Dollar Stores Inc FDO.N said second-quarter same-store sales rose far higher than expected.
Shares of Target fell 3.3 percent, while Family Dollar surged 11 percent.
Wal-Mart also increased its annual dividend 15 percent to $1.09 per share from 95 cents per share in its most recently completed fiscal year.
"Our free cash flow remains strong enough to fund Wal-Mart's growth around the world, make strategic acquisitions and fund returns to shareholders through dividends and share repurchases," CEO Mike Duke said in a statement.
Wal-Mart said its February sales at U.S. stores open at least a year, or same-store sales, rose 5.1 percent as lower gasoline prices eased some household budgets.
The results far surpassed analysts' average estimate for a 2.4 percent increase, and Barclays Capital analyst Bob Drbul said it is clear that Wal-Mart is gaining market share.
"These guys are doing a great job at their agenda, which is widening the moat" between themselves and competitors, he said. "The dividend increase is simply gravy on top of today's announcement."
LOWER GAS PRICES FUELING WAL-MART SALES GAINS
Wal-Mart said lower gasoline prices "significantly boosted household disposable income in February," letting consumers make more trips to stores and spend more on nonessential goods like electronics.
The average price for a gallon of regular gasoline was $1.91 at the end of February, compared with $3.13 in February a year ago, according to the Energy Information Administration.
Wal-Mart hinted last year that lower gas prices were working in its favor, saying it saw an increase in traffic to rural and urban stores after prices dropped in October. [ID:nN182460]
Drbul said declining gas prices help discount retailers because they cater to lower-income shoppers, who are most sensitive to rising energy costs.
Family Dollar Stores said second-quarter same-store sales rose 6.4 percent, above estimates for a 3.6 percent gain, as consumers snapped up consumable items like laundry detergent or soda.
Family Dollar, which sells most of its merchandise for below $10, now expects second-quarter earnings of 59 cents to 61 cents per share. In January, it forecast second-quarter earnings of 48 cents to 52 cents per share.
The gas price drop did not give Target the same benefit. Its February same-store sales fell 4.1 percent, although that was better than the 4.8 percent drop analysts expected.
Target, which tends to attract a higher-income shopper, said sales of food and healthcare items were strongest, while same-store sales in clothes and its home business fell.
Target said it is expecting a wide range of outcomes for March and April sales, with its estimates centered around expectations that same-store sales for the two months combined will fall in the mid single digits.
For March, it is forecasting same-store sales to decline in the high single digits, with April same-store sales to be roughly flat to last year.
Wal-Mart said that for February same-store sales rose 5 percent at its namesake U.S. discount stores, where traffic was positive for the fifth month in a row.
Same-store sales rose 5.9 percent at its Sam's Club warehouse division, as customers purchased fresh food, meat and pet supplies. Demand was weak for furniture, jewelry and other big-ticket, or expensive, items, it said.
Last month, Wal-Mart said that it would no longer provide monthly sales forecasts. Instead, it forecast same-store sales for the period from January 31 through May 1 to increase between 1 percent and 3 percent.
(Editing by Lisa Von Ahn, Dave Zimmerman and Matthew Lewis)