By fighting to be the least-expensive purchasing option, or at least perceived that way by consumers, Wal-Mart drove third-quarter net income up 10 percent to $3.14 billion, or 80 cents a diluted share, from $2.86 billion, or 70 cents, a year ago. Sales for the three months ended Oct. 31 increased 8 percent to $97.63 billion from $90.83 billion and total U.S. comparable-store sales rose 3.3 percent.
“We have strengthened our price leadership position and it is more established than ever with our customers,” Lee Scott, president and CEO, said on a recorded call. “This will continue to drive our success.”
The company said comp sales in its apparel business have outperformed the market overall.
The world’s largest retailer wasn’t totally impervious to the retail slump affecting most of its competitors, however, as it modestly lowered its profit guidance from continuing operations for the year to $3.42 to $3.46 a share from the previously projected range of $3.43 to $3.50, implying fourth-quarter EPS of 99 cents to $1.03.
At the firm’s U.S. Wal-Mart stores, operating income increased 7 percent to $4.29 billion, on a 6 percent rise in sales to $61.16 billion. Sam’s Club operating earnings inched up 2 percent to $365 million on a 7 percent rise in sales to $11.62 billion. And the international segment’s operating profits jumped 11 percent to $1.18 billion on an 11 percent boost in sales to $24.86 billion.
The third quarter showed how Wal-Mart could use its growing clout in the entertainment world to drive apparel sales. An exclusive deal to sell AC/DC’s new album, “Black Ice,” and an accompanying video game helped sales in the young men’s department, which offered related T-shirts and a variety of other items.
Wal-Mart’s sharp pricing in apparel has made it an even tougher competitor as consumers curtail spending.
“Apparel continues to work for us, especially in basics,” said Eduardo Castro-Wright, president and CEO of Wal-Mart’s U.S. division. “On a comp basis, our apparel business outperformed the market. We started the quarter with strong back-to-school sales led by denim and casual apparel. That momentum continued through Halloween.”
And Wal-Mart plans to keep beating the pricing drum. “Price leads all of our marketing programs,” Castro-Wright said. “We will continue to remind customers that the savings add up when you shop at Wal-Mart. This message will continue to be very important during the holidays.”
Last week, the retailer also launched what it dubbed “Operation Main Street,” a seven-week program designed to roll back prices throughout its stores an additional $200 million.
Wal-Mart, which last year rejiggered its apparel department to refocus on a more straightforward value footing, seems to have been fortunate in its timing, said Craig Johnson, president of Customer Growth Partners.
“It’s still a work in progress, but I do think the combination of the merchandise improvement on one hand and the driving economic factors on the other is conspiring to allow them to outperform, which basically means they are taking share,” Johnson said.
The tough economy has, at least for now, also broadened Wal-Mart’s customer base.
“They have these newfound customers who are like Wal-Mart-moms-for-now and the question is will they stay Wal-Mart moms afterward,” Johnson said. “They’re not going to keep all of them, but there’s a good chance they can keep roughly half of them.”