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Wal-Mart Third Quarter Report: Net Income Up, Equity Price Down

(Nov. 15, 2012) — Economic times may be tough, but third quarter net income for Wal-Mart was up an impressive nine percent.  Value-conscious consumers were attracted to the retailer’s heavily advertised low prices in the highly-competitive retail market.

Despite its hefty increase in net income, Wal-Mart shares closed at $68.44 at the end of trading on November 15, down $2.87 on the day, with an almost five percent decline in early trading.  The firm’s stock price has traded as low as $56.26 from its 52-week high of $77.60.

Analysts attributed declining Wal-Mart stock prices to troubles and uncertainty in the global economy.

Wal-Mart’s modest profit forecast for Q4 was less than anticipated, and the firm’s share price accordingly took a hit.  Adding to the downward pressure were less than healthy revenues at stores open at least a year, indicating stunted growth, at least temporarily.

Wal-Mart plans major price incentives to drive traffic to stores on Black Friday (the Friday after Thanksgiving) are expected to boost sales.

Apparel sales at Wal-Mart have been weak in recent years.  T-shirts and socks have accounted for the bulk of clothing sales, according to The City Wire and other sources.

Wal-Mart claimed its poor apparel sales in 2011 could be attributed to a warmer-than-usual winter.  Customers were not inclined to buy coats and sweaters when the weather was so mild.

But clothing sale were up at some other retailers.  TJX, parent company of T.J. Maxx, reported a seven percent increase in garment sales over the same period of the previous year.

Analysts have pegged Wal-Mart as principally a commodity store, with 56 percent of its sales coming from foodstuffs and consumables.

“While they have the scale to play in the fashion arena, it looks like they have opted to be a very good grocery store with a TV, apparel and hardware caboose,” said Brian Johnson, president of Customer Growth Partners, a retail research and strategy firm specializing in the retail sector.

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