NEW YORK (AP) -- Wal-Mart Stores Inc. is expected to report improvement in its U.S. namesake business when it released its fourth-quarter earnings before the market opens Tuesday.
That kind of improvement would underscore how the world's largest retailer is re-energizing its U.S. business by hammering on its low-price roots and using other tactics. And it should serve as a warning for rivals to stay on their toes.
WHAT TO WATCH FOR: Investors expect to see that the holidays produced a second consecutive quarterly revenue gain at Wal-Mart's U.S. stores open at least a year, a key indicator of a retailer's health. That would follow nine straight quarters of declines, the longest streak in Wal-Mart's history.
Analysts expect Wal-Mart's namesake U.S. business to post a gain of 1.6 percent in revenue at stores open at least a year, according to Thomson Reuters. For all its U.S business, Thomson Reuters expects a 1.9 percent increase, including a 5 percent increase at Sam's Clubs open at least a year.
In particular, analysts will also want to understand the driving force behind Wal-Mart's improvement in the U.S. They believe that re-launching its layaway program for the holiday season helped bring shoppers in so they'll want to know whether Wal-Mart plans to make the program permanent.
The still-weak U.S. job market and other economic woes are weighing on Wal-Mart's core customers, lower-income Americans. But Wal-Mart's U.S. business, which accounts for 62 percent of its total revenue, also suffered because of the company's mistakes on price and selection. Wal-Mart, based in Bentonville, Ark., strayed from its bedrock philosophy of "everyday" low prices, and in late 2010, switched back to emphasizing low prices across the whole store, instead of promoting select items. Reclaiming its reputation as the lowest-prices leader is critical to sustaining the upward sales trend. The company also has restored thousands of products it culled during an effort to de-clutter its stores.
In the fourth quarter, Wal-Mart pounded on its low-price message, guaranteeing shoppers it would give them the lowest price on a given item, no matter when they bought it during the holiday season. Shoppers who bought something at a Walmart store between Nov. 1 and Dec. 25 and then found it elsewhere for less got a gift card in the amount of the difference.
Hurt by dollar stores that can beat the retailer on convenience, Wal-Mart is also opening a string of Wal-Mart Express stores that are less than one-tenth the size of its supercenters. Analysts will want to know how the new format is faring.
Meanwhile, Sam's Club has seen steady improvements as it adds better-quality goods and exclusive products. Its customers are more resilient than Walmart shoppers. Walmart shoppers' average household income ranges from $30,000 to $60,000, while Sam's Club customers' average household income is about $75,000, while the U.S. median household income was about $50,000 in 2010.
Wal-Mart's international business, which produces 26 percent of its revenue, has remained strong, and last June it bought a majority of South African retailer Massmart for $2.4 billion, its first foray into South Africa
WHY IT MATTERS: Wal-Mart's results are considered a bellwether of consumer spending because the company draws nearly 10 percent of all nonautomotive spending in the U.S. Wal-Mart's shoppers offer clues to the national and world economies.
WHAT'S EXPECTED: Analysts expect net income of $1.46 per share on revenue of $123.9 billion, according to Factset. The revenue figure excludes Sam's Club membership fees.
LAST YEAR'S QUARTER: Wal-Mart earned $1.34 per share on net sales of $115.6 billion, excluding membership fees.
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