Good results in search of greatness around the globe

Profits grew faster than sales at Walmart’s international division last year, despite investments to drive record expansion and inventory growth, as EDLP took hold in more markets.

International sales increased 13.1% to $35.5 billion from $31.4 billion, however those figures included $2.4 billion in sales related to acquisitions and a negative $1 billion impact from currency exchange. Remove those variables from the equation and international sales increased 8.5% to $34.1 billion. A similar effect played out when looking at the numbers for the full year. Sales increased 15.2% to $125.9 billion and included $4.7 billion related to acquisitions and $4 billion favorable impact from currency exchange. International sales increased 7.2% on a pre-acquisition, constant currency basis to $117.1 billion.

Profits grew at a faster pace. Fourth-quarter operating income increased 15.2% to $2.3 billion, and full-year operating income increased 10.8% to $6.2 billion. On a constant currency basis, operating income in the fourth quarter was negatively affected by $101 million, and for the full year it was favorably affected by $105 million.

Walmart International president and CEO Doug McMillon characterized those results as good and noted that 2011 was a record year of organic growth with 612 new units added and the coming year would bring more of the same with the addition of 26 million to 28 million square feet of new selling space.

“Our new store development is focused on high-growth markets, such as Mexico, China, and Brazil,” McMillon said. “We continue to pursue the middle income customer in these markets. As more families enter the middle income bracket, they want more variety, but they remain sensitive to value. So we position our assortments, locations and format selections to capture this growth. Our mission of saving customers money so they can live better resonates with them.”

Such rapid expansion has resulted in inventory growth at a rate faster than sales which isn’t a good situation and something McMillon said the company is looking to correct through a cross country best practices sharing approach referred to as “powered by Walmart.” Inventories grew by 18.6% and that is on a constant currency basis excluding acquisitions.

“We finished the year with momentum and our commitment to increasing returns for our shareholders remains,” McMillon said. “We’re in a great set of markets, and we have established the foundation to drive growth this year.”