* Q4 EPS $1.44 excluding items vs Wall St view $1.45
* Sales up 5.8 pct to $122.29 bln, St view $124.21 bln
* U.S. division same store sales up 1.5 pct
* Shares down 4.2 pct
By Jessica Wohl
Feb 21 Wal-Mart Stores Inc's price
cuts hurt its fourth-quarter profit and it plans to trim prices
further in the coming months, a move that is expected to keep
The company's shares, up more than 29 percent since August,
fell 4.2 percent in early trading, erasing the gains seen so far
Wal-Mart's quarterly profit and sales fell short of Wall
Street expectations. While price cuts in the U.S. helped bring
in more customers during the crucial holiday season, those
customers did not spend as much as investors had hoped.
Walmart U.S., the company's biggest division, has been
lowering prices and bringing back a wider variety of items to
woo shoppers on limited budgets who started to shop at dollar
stores and elsewhere.
Traffic at those stores rose after six quarterly declines,
showing that such efforts, as well as bringing back a holiday
layaway plan, brought in shoppers.
"The market wanted Wal-Mart to begin to transition to a land
of stronger profits per sales in the fourth quarter and then
project that trend becoming more self-sustaining" this year,
said Brian Sozzi, chief equities analyst at NBG Productions. "On
both scores, there was disappointment to be found."
Walmart U.S. posted a 1.5 percent increase in sales at
stores open at least a year. It was the second quarter in a row
that Walmart U.S. same-store sales rose after nine consecutive
Analysts on average had expected a rise of 1.8 percent,
according to Thomson Reuters data. Wal-Mart expected Walmart
U.S. same-store sales would be flat to up 2 percent, compared
with a 1.8 percent drop a year earlier.
Operating income growth at Walmart U.S. grew at a slower
rate than sales. Gross profit margin declined 13 percentage
points at Walmart U.S. and 33 percentage points overall as the
company cut costs and pushed those savings into lowering prices.
Shares of Wal-Mart were down $2.62 or 4.2 percent, at $59.85
after slipping to $59.68.
EXPECT MARGIN DECLINE
Wal-Mart is optimistic that employment reports will continue
to improve, which could boost consumer confidence. But higher
gas prices are pressuring shoppers' limited budgets.
"There is a new normal with customers," Chief Financial
Officer Charles Holley told reporters. "Markets are more
volatile, gas prices are more volatile and so I think the
customer is going to continue to look for ways to save money
because they don't know what's around the corner."
He warned that investors should expect margins to decline as
the company looks for new ways to trim costs and cut prices.
Wal-Mart earned $5.19 billion, or $1.51 per share from
continuing operations attributable to the company, up from $5.02
billion, or $1.41 per share, a year earlier.
Excluding about 7 cents per share from certain tax matters
and real estate transactions, Wal-Mart earned $1.44 per share.
The company had forecast a profit of $1.42 to $1.48 per share,
which did not include the benefits.
Analysts, on average, expected it to earn $1.45 per share,
according to Thomson Reuters I/B/E/S.
Sales rose 5.8 percent to $122.29 billion, below the average
analyst estimate of $124.21 billion.
Same-store sales rose in all Walmart U.S. categories except
for apparel. A mild winter has crimped demand across the
industry for items such as coats and sweaters.
Wal-Mart forecast first-quarter earnings per share from
continuing operations attributable to the company of $1.01 to
$1.06, compared with a profit of 98 cents per share a year
earlier, which included a lift of 1 cent from multiple items.
Analysts on average forecast $1.05 a share.
The company expects Walmart U.S. same-store sales to be flat
to up 2 percent in the first quarter.
It forecast fiscal year earnings per share from continuing
operations attributable to the company of $4.72 to $4.92. In
fiscal 2012 it earned $4.54 per share including 5 cents of
Wal-Mart's international business grew at a faster clip than
the larger Walmart U.S. Operating income at Walmart
International rose 15.2 percent to nearly $2.31 billion, while
Walmart U.S. operating income rose 1.4 percent to $6.11 billion.
International results were mixed. Britain's Asda saw sales
growth slow from the third quarter. Wal-Mart de
Mexico, or Walmex, topped analysts' expectations as
it opened more stores.
On Monday, Wal-Mart said it was taking a controlling stake
in Chinese e-commerce company Yihaodian to expand its