NEW YORK — Wal-Mart Stores Inc. reported a 27 percent increase in fourth-quarter net income as the world’s largest retailer benefited from cost-cutting and strong sales overseas.
But a key revenue measure in the company’s U.S. business fell for the seventh quarter in a row and came in worse than Wal-Mart’s own projection.
“Some of the pricing and merchandising issues in Wal-Mart ran deeper than we initially expected, and they require a response that will take time to see results,” CEO and President Mike Duke said in a statement.
Wal-Mart posted net income of $6.06 billion, or $1.70 per share, in the quarter ended Jan. 31. That compares with $4.76 billion, or $1.25 per share, a year earlier.
Total revenue rose 2.4 percent to $116.3 billion. Net sales, excluding membership and other income, increased 2.5 percent to $115.6 billion.
Revenue at stores opened at least a year fell 1.1 percent, dragged down by a 1.8 percent drop at the namesake discount stores, which account for more than 60 percent of its business. Analysts had expected a 0.8 percent increase, according to FactSet, but worries on Wall Street mounted in recent days after reports of a weak holiday season.
Excluding one-time items including a tax benefit, earnings were $1.34 per share. Analysts expected earnings of $1.31 per share on net sales of $117.52 billion.
The company said that it is accelerating initiatives like expanding in urban markets and bolstering its online business to turn around U.S. sales. But the downbeat fourth-quarter revenue report raised doubts that turnaround will come this year.
Wal-Mart executives had told investors in November that the holiday quarter would mark the end of the streak in declining revenue.
Over the past year, the company scrambled to add back thousands of products it had culled as part of a renovation of its stores. In recent months, it went back to emphasizing low prices across the store.
Wal-Mart’s disappointing holiday report shows that those changes are taking time to lure back shoppers who defected to rivals.
Wal-Mart’s funk contrasts with where it found itself at the beginning of the recession in late 2007. Unlike most stores, Wal-Mart thrived. Its core customers — households making less than $70,000 a year — bought more. Affluent shoppers became price-conscious and discovered Wal-Mart’s prices were hard to beat.
Shoppers also liked that Wal-Mart’s stores looked neater. The company was finishing a major renovation to address complaints that its stores were messy. But that renovation started to backfire in 2009. As part of the renovation, it had removed thousands of products from stores. Shoppers went elsewhere to find them.
Another big mistake was pricing. Last year, the company strayed from its “everyday low prices” slogan, the bedrock philosophy of founder Sam Walton. Instead, the company slashed prices only on select products, and the deals were temporary. That confused shoppers, and gave them less confidence that they would find the cheapest prices.
Meanwhile, Wal-Mart has been squeezed by competition from dollar stores, grocery chains and Target Corp., which last October began giving customers who pay with its branded credit or debit card a 5 percent discount.
Dollar stores are winning over customers with convenience, and Wal-Mart is fighting back by working with suppliers to come up with smaller packages. Wal-Mart also plans to open smaller stores in urban markets, but analysts say it is moving too slowly.
Duke said in a recorded conference call Tuesday that it would move forward “with even greater urgency in opening small stores.” The company said that it plans to open its first Walmart Express stores in the second quarter.
At its U.S. namesake discount stores, business was weak across many types of merchandise, including electronics, which has seen prices continue to decline. Its food business posted gains in the low single digits, and health and wellness products had increases.
But for the “consumables” category, which includes salty snacks, bottled water and milk, the company suffered low single-digit declines. Clothing sales also fell, though the company has seen improvements in its men’s and women’s departments.
Wal-Mart said during the prerecorded call that rising inflation in key raw materials such as cotton is pushing the company to consolidate suppliers to improve purchasing power.
Wal-Mart’s profits and its international business, which accounts for 26 percent of total revenue, remained a bright spot, and it expects growth in emerging markets to speed up.
For the fourth quarter, international revenue, helped by strong sales particularly in Brazil, China and Mexico, rose almost 9 percent. At Walmart’s U.S. business, revenue slipped 0.5 percent, the second quarterly decline in a row. At Sam’s Club, revenue increased 4.4 percent.
Wal-Mart expects first-quarter earnings per share between 91 and 96 cents. Analysts expected 96 cents per share, according to FactSet. The company also forecast that earnings for the year would be between $4.35 and $4.50 per share. Analysts expect $3.67 per share.