Retail behemoth Wal-Mart (NYSE:WMT) reported another quarter of modest domestic growth and strong international expansion in 2011. The bright spot was Sam's Club, though it has a minimal impact on total firm profitability. Over the long haul, Wal-Mart represents one of the safest bets in retail and has appeal to conservative, income-minded investors. (For more on retail stocks, check out Analyzing Retail Stocks.)

TUTORIAL: Investing 101

First Quarter Recap
Total net sales improved 4.4% to $104.2 billion in 2011 as retail sales also grew 4.4% and membership income related to the Sam's Club warehouse chain jumped 8.4%, but accounted for less than 1% of the top line. U.S. namesake store sales made up 60.6% of retail sales and grew a very modest 0.6% as new store openings offset a 1.1% decline in same-store sales. International sales continued to be robust and rose 11.5% to account for 27% of sales. Sam's Club sales accounted for the remaining 12.4% of the top line increased a very healthy 9.4% as comparable sales rose 4.2%. Sam's Club performance has improved and it is better competing with rivals that include market leader Costco (Nasdaq:COST) as well as BJ's Wholesale Club (NYSE:BJ) in the eastern U.S. and PriceSmart (Nasdaq:PSMT) in the western U.S.

Divisional operating income increased 1.2% and reached $6.2 billion. The U.S. namesake stores continued to account for the bulk of profits at 75% and grew a modest 0.8%. International rose a slightly stronger 1.2% to account for 17.7% of profits, with Sam's Club seeing a strong 7% improvement to account for just over 7% of the total.

Backing out corporate overhead, company operating profits increased 2.1% to $5.4 billion. Lower income taxes helped send net income up 3.8% to $3.4 billion and share buybacks helped push per share earnings up by 11.5% to 97 cents per diluted share. (For more on the effect earning has, read Earnings Power Drives Stocks.)

The company provided second quarter 2011 profit guidance and currently expects earnings between $1.05 and $1.10 per diluted share. For the full year, analysts project total sales growth north of 4% and total sales of almost $440 billion. The current consensus analyst earnings projection is $4.44 per share.

Wal-mart generated $2 billion in operating cash flow but spent $2.4 billion on capital expenditure, $2.1 billion repurchasing its own shares and $1.3 billion to pay dividends. the company had to issue debt to cover the capital outlays not generated by its operations. This is unlikely to be a recurring situation as its business is somewhat seasonal and it generates more sales and profits during the holiday season, but is something for investors to keep an eye on.

Bottom Line
Overall, Wal-Mart continues to trade at a reasonable forward earnings multiple of less than 13. It should continue to leverage single digit sales growth into low double digit earnings growth, meaning investors should see a similar level of share price gains given stocks follow the fundamentals of a firm's underlying operations over the long term. Throw in a current dividend yield of about 2.6% to boost investor total returns to the mid-teens over time. The company, like off-price apparel and home furnishing rival TJX Companies (NYSE:TJX) is also somewhat recession resistant and can help protect portfolios from the next economic downturn. (For more assistance in investing in retailers, see The 4 R's Of Investing In Retail.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  2. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  3. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  6. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  7. Professionals

    What to do During a Market Correction

    The market has what? Here's what you should consider rather than panicking.
  8. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  9. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  10. Professionals

    Tips for Helping Clients Though Market Corrections

    When the stock market sees a steep drop, clients are bound to get anxious. Here are some tips for talking them off the ledge.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  5. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  6. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!