Business as Usual: Walmart, Costco Continue to Forge Success
In a speech curiously appropriate for the election season, Wal-Mart Stores (NYSE:WMT) Chief Executive and President Mike Duke told audience members at Walmart’s 19th Annual Meeting for the Investment Community that the retail superpower is “strong, and we are getting stronger.”
Duke delivered an optimistic, promise-filled speech befitting a politician, praising Walmart’s past successes and urging investors to look eagerly toward an even brighter future. Duke repeatedly referred to what he terms a “lot of open road ahead,” and laid out plans for how his company will achieve its goals of sustained growth, leverage, and returns for shareholders.
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Duke’s formula is for Walmart to continue refining its already-proven business methods while stressing three major keys going forward: momentum, discipline, and investment. He explained how each of the three tenets interrelate and set Walmart up for future growth, particularly emphasizing the importance of the company’s commitment to discipline.
“Now you’re going to see us bring the same increased discipline to our capital expenditures that we have been bringing to operating expenses,” he said.
Duke concluded his speech by reiterating his belief that if Walmart stays true to its roots and expands its proven practices even further, it “will continue to be the healthiest and best-positioned global retailer.
In other retail news, Walmart competitor Costco (NASDAQ:COST) reported quarterly profits Wednesday that were pleasantly higher than expected. The wholesaler attributes the spike in profits to its recent increases in membership fees.
Costco posted fiscal fourth-quarter earnings of $609 million, or $1.39 per share, beating the analysts’ estimates for the quarter of $1.31 per share. Shares in the company were up 3.8 percent in early trading as a result.
Due to a 10 percent increase in membership fees instituted in November 2011, revenue from membership jumped 18 percent to $694 million. And the higher dues don’t seem to be deterring members: Costco expects to sustain strong rates of membership renewals and increased sign-ups as new warehouse stores continue to open.
The added revenue from the membership segment means Costco can continue its practice of offering its shoppers lower-than-usual prices – at the cost of reduced margins – to instill loyalty and keep the customers coming back to its stores.
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