Wal-Mart Stores Inc. cheered Wall Street Tuesday by reporting fourth-quarter profits that surpassed analysts' predictions as the world's biggest retailer continued to undercut rivals' prices and use its clout to snare better deals from suppliers.
The retailer's stock rose $3.06 14 Tuesday to close at $87.56 14. In mid-morning trading, the giant merchant's stock hit a record 88, boosting the Dow Jones industrial average.
Analysts said the allure of discount merchandise coupled with Wal-Mart's tight inventory controls helped lead to its better-than-anticipated showing.
Wal-Mart said Tuesday its net income in the quarter ended Jan. 31 rose 21 percent to $1.56 billion, or 70 cents a share, from $1.29 billion, or 57 cents a share, in the same period a year earlier.
Sales climbed 15 percent to $40.79 billion in the quarter from $35.39 billion in the year-earlier period. Sales at stores open at least a year, considered a benchmark of a retailer's performance, rose 8.7 percent.
For the year, Wal-Mart earned $4.43 billion, or $1.98 a share, up from $3.53 billion, or $1.56 a share, a year earlier. Sales rose to $137.63 billion from $117.96 billion a year earlier.
David Glass, chief executive officer of Wal-Mart, said in a statement that his company's overseas sales climbed a dramatic 63 percent to $12.2 billion amid rapid expansion.
"Our domestic operations," he added, "also achieved profits in excess of our own aggressive plans, while continuing to grow sales and market share."
Wal-Mart's performance has fueled speculation that the company soon will announce a stock split. A company source would say only that Wal-Mart is "getting closer" to considering a split, but no announcement was imminent.
Analysts say Wal-Mart's booming growth reflects the healthy economy as well as consumers' growing demands for bargains.
"Fifteen years ago, a person who shopped at Nordstrom might not have shopped at Wal-Mart," said Sally Wallick, an analyst with Legg Mason Wood Walker in Baltimore. "That has changed."
The basic strategies behind Wal-Mart's success are the same: It continues to buy merchandise at a discount from suppliers and passes those savings on to consumers. In addition, the retailer's employees regularly scope out prices at rivals' stores and scurry back to their outlets to cut prices.
"They have a significant investment in technology that rivals the government and allows them to stay in stock better than anyone in the industry," said Wayne Hood, an analyst with Prudential Securities.
Nationally, Wal-Mart operates more than 2,800 discount stores and supercenters under the Wal-Mart and Sam's Club banners. This year it plans to open about 200 stores in the United States and about 80 outlets internationally.