Wal-Mart Profit Up; Tops List

BENTONVILLE, AR -- Wal-Mart Stores on Tuesday posted a better-than-expected 15.5% jump in quarterly net income as strong profits abroad helped offset a sluggish performance at its U.S. Sam's Club warehouse stores, according to a Reuters report.

The largest retailer -- and world's biggest company in terms of sales with $244.5 billion in annual revenues -- said analysts' earnings forecasts for the coming year were "attainable," although the cost of expensing stock options and other one-time items will trim profits.

Wal-Mart, struggling with fierce competition in the warehouse club sector led by Costco Wholesale Corp., said it was "very disappointed" with results from Sam's Club, but profits in that unit should improve in the first quarter.

Its international division outstripped profit forecasts, however, pushing overall quarterly results slightly higher than analysts and the company had expected.

On a recorded message, Wal-Mart credited strong sales in Britain, Canada and Mexico, adding that currency benefits added only $1 million to international quarterly operating profit of $757 million. Wal-Mart's U.S. sales at stores open at least a year -- a key retail measure known as same-store sales -- slowed considerably over the past year, and Wal-Mart forecast more of the same at least through the first quarter.

Same-store sales were up just 2.7% for the fourth quarter, well below the 8.1% gain recorded in the first quarter. It forecast same-store sales would be up in the range of 2% to 4% for the current first quarter.

Bentonville, AR-based Wal-Mart said it earned $2.529 billion in the fourth quarter, ended January 31, compared with $2.189 billion in the year-ago period. Sales rose 10.7% to $71.07 billion. On the recorded update, Lee Scott, president and ceo, said "challenging and troubling" aspects of the past year would continue in the current fiscal year. He named geopolitical concerns among those "troubling" issues. For the fourth quarter the Wal-Mart stores segment -- including Supercenters -- had an operating profit of $3.59 billion, up 15.8%. Sam's Club operating profit fell 0.7% to $295 million in the quarter. The international segment posted a 37.6% jump in operating profit.

Wal-Mart Tops Fortune's List of America's Most Admired Companies

In other Wal-Mart news, Fortune announced today that Wal-Mart is No. 1 on the magazine's annual survey of Most Admired Companies, marking the first time in the survey's 21-year history that the nation's largest company is also its most admired, according to a Business Wire report.

"The planting of Wal-Mart's flag atop yet another summit caps a year in which the company seemed to ignore both the economic slowdown and the swirling corporate scandals," says Nicholas Stein, who wrote the introduction to the list.

As striking as Wal-Mart's rise is the fall of General Electric, which held the No. 1 spot for the past five years. This can be attributed in part to Wall Street's increasing impatience with opaque financial statements after the demise of Enron, as well as the very public breakup of former ceo Jack Welch's marriage. Rounding out the top ten are Southwest Airlines (No. 2); Berkshire Hathaway (No. 3); Dell Computer (No. 4); General Electric (No. 5); Johnson & Johnson (No. 6); Microsoft (No. 7); FedEx (No. 8); Starbucks (No. 9); and Procter & Gamble (No. 10).

The list and related stories appear in the March 3 issue of Fortune, available on newsstands February 24 and at www.fortune.com on Tuesday, February 18.

The three other companies ousted from this year's list--Intel, Home Depot and Citigroup--have also taken hits. "Chipmaker Intel, facing the worst slump in the history of the PC industry, earned $3.1 billion last year--ahead of 2001 but down 70% from 2000," says Stein. "The company's shares have declined 80% from their 2000 high of nearly $75. At Home Depot, where once-sizzling growth has slowed, the stock lost 52% of its value in 2002, the largest drop of any company on the Dow. As for Citigroup, its "reputation was tarnished when the company was fined $400 million last year after being implicated in the industry-wide scandal over conflicts of interest between investment banking and research divisions."

The total return of the ten Most Admired Companies in 2002 was down 8.63%--more than 13% higher than the total return on the S&P 500. Furthermore, the top ten won the business world's regard by refocusing attention where it counts the most: on customers and employees.

Fortune's Most Admired Companies issue also ranks companies by industry. For these rankings, the Hay Group took the ten largest companies by revenues in 66 industries, including large subsidiaries of foreign firms. They surveyed 10,000 executives, directors, and securities analysts who rated the companies in their industries using eight criteria (social responsibility, innovation, long-term investment value, use of corporate assets, employee talent, financial soundness, quality of products/services, and quality of management). To create the top ten list, the Hay Group asked respondents to select the ten companies they admired most in any industry, based on a list of companies that ranked in the top 25% in last year's survey, as well as companies that ranked below the first quartile overall but finished in the top 20% of their industry. Thus a company could score high on its industry list but not make the list of ten Most Admired Companies.

AMERICA'S MOST ADMIRED COMPANIES 2003
1--Wal-Mart Stores
2--Southwest Airlines
3--Berkshire Hathaway
4--Dell Computer
5--General Electric
6--Johnson & Johnson
7--Microsoft
8--FedEx
9--Starbucks
10--Procter & Gamble