Retail giant Wal-Mart (NYSE:WMT) revealed a significant milestone in its February 17 quarterly and full-year earnings results. Fourth quarter sales, which are typically the highest for retailers due to holiday shopping, again exceeded 12 digits. In addition, its $405.6 billion in sales for the year ended January 31, 2009 pushed past the $400 billion barrier for the first time. Wal-Mart’s ability to maintain control of its sizable warehouse stores throughout the world is mystifying. Showing little sign of losing focus any time soon, Wal-Mart remains one of the safer bets in the stock market these days.
Quarterly sales at the namesake U.S. division improved 6% to $71.5 billion (66% of total sales), as same store sales grew 2.8%. Comps also came in positive at discount warehouse chain Sam’s Club, which grew 2.5% and came in ahead of comps
reported by rival Costco (Nasdaq:COST) for the all-important holiday season. Total Sam’s sales were flat at $11.8 billion (11%), however. International sales declined 8.4% to $24.7 billion as a strong U.S. dollar masked 9% overseas growth on a constant currency basis. Total quarterly store sales grew 1.7% to $108 billion, while membership and other income totaling $1.1 billion pushed total sales to $109.1 billion. (Learn more about this sector in Using Consumer Spending As A Market Indicator and Analyzing Retail Stocks.)
Full-year sales grew 7% on positive comps and high single-digit growth in each of the three operating units. Management held costs in check to only 4% growth and helped net income increase to $13.4 billion. Earnings improved 9% to $3.40 per share and should continue to grow for the coming year, as management put earnings expectations between $3.45 and $3.60. Full-year cash generation improved markedly, as operating cash flow grew 12% to $23.1 billion and lower levels of CAPEX helped push free cash flow (FCF) to approximately $11.6 billion, or just under $3 per share.
At about 16 times trailing FCF, and 14 times forward earnings, shares of Wal-Mart are no steal. However, Wal-Mart is outperforming peers like Target (NYSE:TGT), which recently announced corporate headcount reductions to offset “weaker than expected sales” at its own big-box stores. (BJ’s Wholesale Club (NYSE:BJ) will not release its fourth quarter and fiscal year end results until March 4, 2009.) Additionally, Wal-Mart offers downside protection from a protracted slump in global economic activity given that shoppers increasingly head to its stores to take advantage of low costs. Throw in a dividend yield of 2% and investors might expect a high single-digit annual return on investments for the foreseeable future. (Read more about dividend yield in our Investment Valuation Ratios Tutorial.)