Wal-Mart Stores posted a better-than-expected 9.8% rise in fourth-quarter profit on Tuesday, helped by cost controls and international sales.
Shares of the world's largest retailer rose on the news.
Wal-Mart said net income rose to $3.94 billion, or 95 cents a share, in the fourth quarter that ended on Jan. 31, compared with $3.59 billion or 86 cents a share a year ago.
Fourth-quarter earnings included a boost of $98 million, or 2 cents a share, related to a tax benefit.
Excluding the benefit, analysts on average had expected profit of 90 cents a share, according to Reuters Estimates.
In an effort to widen its appeal beyond its core low-income shopper, Wal-Mart downplayed its discount image last year and stocked its stores with more trendy and upscale items, like organic food and skinny jeans.
But the efforts yielded mixed results and in the face of lackluster U.S. sales, it vowed its "most aggressive pricing strategy ever" for the past holiday season.
It said the return to its low-priced roots helped its fourth-quarter results.
"Wal-Mart U.S. made the difference in our fourth quarter," said Lee Scott, Wal-Mart's chief executive, on a recorded call.
Sales rose almost 11% to $98.09 billion, below analyst expectations of $99.68 billion. Fourth-quarter sales at its U.S. stores open at least a year - better known as same store sales - rose 1.6%.
In its international business, sales rose almost 30%, to $22.73 billion, helped by three acquisitions, including raising its stake in Japanese subsidiary Seiyu.
"Their international operations, if they can keep growing at this rate plus become more and more profitable, it'll be a pretty significant factor with Wal-Mart," said David Abella, a portfolio manager at Rochdale Investment Management, which owns Wal-Mart shares and has $2.4 billion under management.
New Fiscal Year
For the first quarter, Wal-Mart expects U.S. same store sales to increase 1% to 3%.
The retailer forecast earnings per share from continuing operations for the first quarter of 68 cents to 71 cents, and $3.15 to $3.23 for the year. Analysts are expecting first-quarter earnings per share of 68 cents and $3.20 for the year, according to Reuters Estimates.
Rochdale's Abella said that the first-quarter outlook had some element of "optimism," but the full-year forecast was on the conservative side.
"I think overall it's the smart thing to do because you don't know where the economy is really going to go," he said.
Wal-Mart expects benefits from a new system that schedules hourly employees based on the number of shoppers in a store. It implemented the system to cut labor costs and is moving all hourly workers to the system.
Wal-Mart has also resumed store remodeling projects. While the company hopes the projects will make it easier to shop at its stores in the long term, they have hurt sales in the short term. It completed almost two-thirds of the 1,800 store remodels projects in 2006.
In the fourth quarter, it repurchased more than $1.7 billion of its stock, or roughly 38.9 million shares.
Shares of the Bentonville, Ark.-based company have risen roughly 7.5% in the past year, while rival Target is up roughly 18%.
Wal-Mart stock trades at 15.1 times next year's earnings estimated earnings, compared with a multiple of 17 for Target.