Retailing Goliath Wal-Mart (WMT) announced decent fourth quarter results yesterday. Revenue increased 3.9% during the quarter to $127.1 billion, just a touch below consensus expectations. Earnings were better than expected, but boosted by a favorable tax rate, growing 11% year-over-year to $1.67 per share.
Although the quarter was by no means a blockbuster one, we thought results were acceptable. Wal-Mart's core US namesake business experienced 2.6% sales growth thanks to same-store sales that increased 1% (1.8% ex-fuel). Traffic declined marginally, down 0.1%, but average tickets were 1.1% higher than the year prior, and NPD indicated that the firm grew market share over the holiday season. Let's not forget that Wal-Mart registered sales of nearly $75 billion during the quarter, so even a small increase in same-store sales means the company is selling a lot more items. Unfortunately for Wal-Mart, such is the law of large numbers.
Sam's Club also performed fairly well in the fourth quarter, with revenue rising 3.4% year-over-year to $14.5 billion, driven by same-store sales growth of 2.3% (3.6% excluding currency). Unfortunately, both businesses are off to a slow start in fiscal year 2014, which management blames mostly on the payroll tax reset and a slower start to tax refunds. We believe refund checks will balance themselves out over the course of the year, and we see no reason to assume that consumers will spend refunds in a manner different than what they've done before.
Excluding the impact of currency, sales at Wal-Mart International increased 6% year-over-year during the fourth quarter. On a reported basis, revenue in the geographic segment grew 7.4% for the year to $135 billion-meaning the firm's international revenue is now almost half of that of the US. The company's international operating margin is still running about 250 basis points below that of the US, so the incremental revenue coming from the international segment will not be as accretive to the bottom line. Still, we like the firm's opportunities across the globe.
Free cash flow for fiscal year 2013 was terrific, growing 18% year-over-year to $12.7 billion. As a result, Wal-Mart raised its dividend 18% to $1.88 per share, giving shares a yield of 2.7% at current levels. We plan to update our dividend report soon. Going forward, the company forecasted first quarter fiscal 2014 earnings a touch below consensus, looking for $1.11-$1.16 per share on flat same-store sales growth. For the entire fiscal 2014, Wal-Mart anticipates it will earn $5.20-$5.40 per share, roughly in line with consensus estimates.
Overall, we were quite pleased with Wal-Mart's fourth-quarter results, and we believe the early fiscal first-quarter weakness isn't much to be worried about. Wal-Mart's sales should roughly track GDP expansion in the US, and with the US consumer constrained, we weren't expecting much of a jump in same-store sales growth throughout the first half of 2013 anyway. We believe Wal-Mart will continue to generate large amounts of free cash flow, which it will generously return to shareholders. Still, we're not anxious to add the company to the portfolio of our Dividend Growth Newsletter on the basis of valuation.