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Wal-Mart, Target Surpass Expectations

Posted on: Thursday, 13 May 2004, 06:00 CDT

NEW YORK - Retail heavyweights Wal-Mart Stores Inc. and Target Corp. beat Wall Street expectations with double-digit profit gains for the first quarter as strong sales earlier in the year more than offset a shopping slump last month.

Upscale retailer Tiffany & Co. also posted a double-digit profit rise Thursday for the February-April period that matched expectations, boosted by robust sales in the United States.

The upbeat mood, however, was tempered as Wal-Mart's president and CEO expressed concern about rising gasoline prices and the government reported wholesale prices made their biggest leap in a year in April. Separately, the Commerce Department said sales at the nation's retailers dropped by 0.5 percent in April, following a strong 2 percent rise in March.

"Wal-Mart is a barometer for the discount segment, and we will be watching the impact of increasing prices in food and gasoline on the low-income consumer," said Ken Perkins, research analyst at Thomson First Call.

Wal-Mart Stores Inc.

The world's largest retailer reported a 16 percent increase in earnings to $2.2 billion, or 50 cents per share, for the period ended April 30 from $1.8 billion, or 41 cents per share, a year earlier.

The results, helped by its improving apparel business, were a penny a share higher than forecast by analysts surveyed by Thomson First Call.

Net sales at the Bentonville, Ark.-based company rose 14.2 percent to $64.8 billion from $56.7 billion a year ago.

The company raised its earnings forecast for the year to $2.39 a share from $2.35. Analysts surveyed by Thomson First Call had expected Wal-Mart would earn $2.37 for the year.

Wal-Mart's chief executive and president Lee Scott said Thursday in a pre-recorded call that he's optimistic about the rest of the fiscal year, but was cautious about prices at the pump.

"Although I am concerned about high gasoline prices - which are taking more than somewhere around $7 a week out of our average customer's spendable income - I believe the growth in employment and real income will lessen the impact," he said.

Sales in U.S. stores open at least a year, considered the best measure of a retailer's health, increased 6.4 percent in the quarter, Wal-Mart said.

Wal-Mart has stores in all 50 states and Puerto Rico. It also has stores in eight foreign countries and a stake in Japanese retailer Seiyu Ltd., which has 400 stores.

Its shares rose 19 cents to close at $55.25 on the New York Stock Exchange.

Target Corp.

The Minneapolis-based retailer's earnings jumped 25 percent to $438 million, or 48 cents per share, for the three months ended May 1, up from $349 million, or 38 cent a share, a year ago.

Revenue rose 12.3 percent to $11.58 billion from $10.32 billion a year ago.

Its profit beat by a penny a share the consensus of analysts surveyed by Thomson First Call.

Revenue from Target's namesake stores increased 14 percent to $10 billion, as the division benefited from new stores and growth of 7.3 percent for stores open at least a year.

Mervyn's revenue and comparable-store sales both dipped 1.4 percent, with revenue of $793 million. Revenue increased 4 percent to $614 million at Marshall Field's, on comparable-store sales increases of 6.1 percent.

The company offered no update on its offer to sell its Marshall Field's and Mervyn's store divisions. Last month, Federated Department Stores Inc. said it's exploring whether to buy the Marshall Field's department store group.

Shares of Target dropped $1.18, or 2.7 percent, to close at $43.17 on the NYSE.

Tiffany & Co.

The New York-based jewelry retailer's profit rose 12 percent in the quarter, meeting Wall Street expectations, but said that profits would be lower than expected for the year as it struggles with its Japanese market.

For the three months ended April 30, the retailer earned $40.3 million, or 27 cents per share, compared with $35.9 million, or 24 cents per share, a year ago.

Net sales increased 15 percent to $457 million from $395.8 million a year ago. On a constant-exchange rate basis that excludes the effect of translating local-currency denominated sales into U.S. dollars, worldwide net sales rose 11 percent and same-store sales rose 9 percent.

U.S. retail sales increased 23 percent in the first quarter as same-store sales rose 20 percent due to a 30 percent increase at Tiffany's New York flagship store and 17 percent growth in branch store sales. The average amount spent per transaction increased.

International retail sales rose 12 percent. Direct marketing sales declined 1 percent in the first quarter to $36.9 million.

The company said it expects at least an 11 percent growth in sales and at least a 12 percent growth in net earnings for the year, which would bring earnings per share to $1.62. Analysts surveyed by Thomson First Call expected $1.66 per share.

Tiffany shares lost $2.82, or 7.6 percent, to close at $34.08 on the NYSE.

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Associated Press Writer Chuck Bartels contributed to this report.

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On the Net:

Target Stores: http://www.target.com

Tiffany & Co: htttp://www.tiffanys.com

Wal-Mart Stores Inc.: http://www.walmartstores.com

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