Higher customer traffic boosts Wal Marts sales; margins under pressure

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Wal-Mart Stores Inc (WMT. N) on Tuesday reported higher-than-expected U.S. sales, helped by more customer visits to its stores and accelerating online activity, and shares of the world's largest retailer rose more than 3 percent. Investors shrugged off an 8 percent drop in gross profit margins stemming from Wal-Mart's continued efforts to cut prices to make them more competitive, along with discounts offered after the holiday season. The results buck a string of disappointing holiday sales figures from rivals including Target Corp (TGT. N), which reports earnings on Feb. 28. Wal-Mart said it expected earnings per share of 90 cents to $1 for the current quarter and $4.20 to $4.40 for this fiscal year. Analysts' estimates were within both ranges. The company said sales at U.S. stores open at least a year rose 1.8 percent, excluding fuel price fluctuations, during the fourth quarter ended on Jan. 31. Analysts on average were expecting a 1.3 percent increase in comparable sales, which include e-commerce, according to research firm Consensus Metrix. Under Chief Executive Officer Doug McMillon and new e-commerce chief Marc Lore, Wal-Mart has been trying to catch up with online rival Amazon.com Inc (AMZN. O). In October, the company said it would slow the pace of new store openings to focus on expanding its e-commerce business. Chief Financial Officer Brett Biggs said comparable sales were up at all store formats due to a steady improvement in stores, strong growth from e-commerce and a growing contribution from the online grocery business."We've now seen nine consecutive quarters of traffic growth in our stores," Biggs said on a conference call with reporters. "Clearly, we're gaining traction."

U.S. store visits rose 1.4 percent, compared with a year-earlier increase of 0.7 percent. Despite lower food prices, Biggs said comparable sales rose in Wal-Mart's grocery business, which accounts for nearly 53 percent of overall revenue. A delay in refund checks from the Internal Revenue Service has curbed customer spending somewhat, Biggs said. He still expects comparable sales to rise 1 percent to 1.5 percent in the first quarter ending on April 28. Net income attributable to Wal-Mart fell to $3.76 billion in the fourth quarter from $4.57 billion a year earlier, reflecting the impact from discontinued real estate projects and severance.

Excluding items, earnings per share of $1.30 exceeded the analysts' average estimate of $1.29, according to Thomson Reuters I/B/E/S. Revenue rose 1 percent to $130.9 billion, with the depreciation of the Mexican peso to the U.S. dollar curbing growth. Excluding currency fluctuations, sales came to $133.6 billion. E-COMMERCE ACCELERATES

Online sales increased 29 percent, accelerating from 20.6 percent in the third quarter. That business added 80 basis points to fourth-quarter comparable sales. Lore said Wal-Mart had a "nice uptick" in online sales after it recently made two-day shipping free in the United States. The retailer will keep looking for acquisitions "wherever it makes sense," he added. Wal-Mart recently acquired online outdoor clothing and gear retailer Moosejaw for $51 million in cash, its third purchase in about six months. The company announced a 2 percent dividend increase to $2.04 a share annually. Shares of Wal-Mart were up 3.5 percent at $71.78 in morning trading. At Friday's close, they had risen 0.4 percent since the start of the year.