Sales soft, but Walmart beats profit forecast
Walmart overcame a meager 1% same-stores sales increase at U.S. stores to deliver better-than-expected fourth-quarter profits.
The company said total sales increased 3.9% to $127.1 billion compared to $122.3 billion last year. Without the benefit of a favorable currency exchange situation, sales would have increased a lesser 3.7% to $126.8 billion. Full year sales increased by 5% to $466.1 billion compared to last year’s total of $443.8.
Fourth-quarter profits increased 7.9% to $5.6 billion and earnings per share of $1.67 were 10.6% higher than the $1.51 reported the prior year and well ahead of the company’s guidance and analysts’ consensus estimate. Walmart had forecast profits in a range of $1.53 to $1.58 and analysts were looking for $1.57.
"Walmart topped off a really good year with a solid fourth quarter, and I’m proud of what we accomplished as a team," said Mike Duke, president and CEO of Wal-Mart Stores, Inc. Every day our associates around the world deliver on our mission to help customers save money so they can live better. Together, we added $22 billion in sales to top $466 billion. Walmart U.S. was a key driver of our 5% sales increase."
The 1% U.S. comp increase was at the low end of a forecast range which called for a 1% to 3% increase and a slow start to the first quarter has the company forecasting flat same store sales.
To offset the deceleration in U.S. comps, which can be attributed to a range of external economic pressures, Walmart highlighted its volume growth and market share gains. The company said its U.S. division added more than $10 billion in net sales last year, including $4.7 billion as a result of same store sales growth. The company said it gained share in categories such as food, consumables, health and wellness, entertainment and toys.
"Despite comps at the low end of the guidance, our market share gains, as noted by Nielsen and NPD, along with our two-year positive comp trend indicates the underlying strength of Walmart’s business," said Walmart U.S. president and CEO Bill Simon. "Comp sales grew by 1% for the quarter, lapping a solid 1.5% comp last year. This represented $743 million in comp growth for the quarter."
Looking ahead, Walmart faces a challenging comparison against a first quarter 2012 U.S. comp increase of 2.6% and a variety of headwinds such as increased gas prices and reductions in take home pay. Against this backdrop, Simon expressed confidence that the company’s familiar low price strategy will continue to resonate with shoppers.
However, a slow start to February caused largely by a delay in tax refunds has dimmed enthusiasm for the first quarter and resulted in a flat same store sales forecast.
"We continue to monitor economic conditions that can impact our sales, such as rising fuel prices, changes in inflation and the payroll tax increase," Simon said.
Epicor brings cloud hosting to CNRG retailers
Dublin, Calif.-based Epicor Software Corp. announced the company’s first major implementation of Epicor Eagle delivered in a software as a service (SaaS) hosted environment. Home Hardware Center, the first retailer of Central Network Retail Group (CNRG) to undergo the hosted solution conversion, successfully completed integration in early February 2013.
CNRG, founded in Mississippi in 2011, operates 41 home center and hardware stores in seven Southern states — 38 of those currently operate using Epicor solutions.
CNRG CEO Boyden Moore said the retail group challenged Epicor to come up with a solution to fit CNRG’s business.
“We feel strongly that a cloud-based or hosted solution provides a better infrastructure for the speed and flexibility our company needs,” Moore said. “Epicor was able to fulfill that requirement by offering us the Epicor Eagle hosting service for our 21 Home Hardware Center stores. The transition from our server to the hosted server was extremely smooth.”
The company’s critical business data is located in an Epicor Tier-4 datacenter that provides significant redundancy and fault-tolerance in regards to power, network circuits, backups, security and server hardware.
Hosted solutions can provide significant time savings over on-premise environments, which allows for more time to focus on driving business initiatives and serving customers,” said Craig McCollum, executive VP and general manager, retail distribution solutions for Epicor.
“In today’s businesses, every resource must be weighed in order to operate at maximum efficiency with cost effectiveness at the top-of-mind,” he said.
Employers prepare to add Roth features to 401(k) plans
An increasing number of U.S. employers are planning to add Roth options to their 401(k), 403(b) or other defined contribution plans in 2013, a January 2013 survey by consultancy Aon Hewitt reveals. This comes on the heels of legislation that makes it easier for defined contribution investors to convert balances within their savings plan into Roth accounts.
Unlike traditional 401(k) plans, where employees make pretax contributions and, after retirement, pay income taxes on all distributions, Roth 401(k) contributions are made with after-tax dollars. Funds in the plan grow tax-free, and on retirement no taxes are owed on any distributions.
Previously, converting funds from a pretax to a Roth 401(k) account was limited to money that was already “distributable” without penalty from the pretax plan — typically when an employee reached age 59½ or terminated employment, unless the plan otherwise allowed in-service distributions.
The American Tax Payer Relief Act — the “fiscal cliff” deal enacted in January 2013 — includes a provision that “opens the door for employers to allow expanded in-plan conversions, but it’s not a requirement,” said Patti Balthazor Bjork, retirement research director at Aon Hewitt, in a media release. “However, it makes the Roth conversions more attractive for employees, so there will likely be increased interest and incentive for employers to offer them.”
The consultancy’s survey of large U.S. employers (those with more than 1,000 employees) revealed that:
• While almost half (49%) of respondents currently offer no Roth option, 29% of those that don’t offer a Roth said they were very or somewhat likely to add this feature in the next 12 months. Of those new adopters, more than three-quarters (76%) will add both Roth contribution and in-plan conversion features.
• Employers that already have a Roth option are likely to allow employees to make in-plan conversions to Roth accounts. Of those respondents that currently allow Roth contributions but do not offer in-plan conversions, more than half (53%) are very or somewhat likely to add this feature in the next 12 months.
• For companies that already allow Roth contributions and in-plan conversions for amounts not subject to early-withdrawal penalties, more than three-quarters (79%) are very or somewhat likely to expand the eligibility for in-plan conversions, allowing them for previously nondistributable amounts.
“While employers have steadily been adopting Roth features in recent years, the new law, along with a better understanding of Roth by both participants and companies, will encourage more plan sponsors to add these options in the near-term,” Bjork said.
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