The Wal-Mart Monster

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Retail giant Wal-Mart's (NYSE: WMT) fourth-quarter and full-year results released this morning featured an 11% year-over-year jump in quarterly profits on a 12.2% gain in revenues. Sales and profits for the year were comparably higher. Those are fantastic results from a company the size of Wal-Mart.

Comparable same-store U.S. sales continued to trend higher. Sales at Wal-Mart stores increased 4.4%, only to be surpassed by a 6.7% comp gain at Sam's Club stores. International operations continued to boom. Sales for the quarter were up 17.3%, and profits rose 15.2%.

Every bit as importantly, a good bit of this growth flowed to the bottom line and right on over to the balance sheet. For the year, the company increased its net cash position by $2.4 billion.

On the earnings call, it was mentioned that January was a particularly strong month (and February is continuing this trend). It was also mentioned that apparel was marked down to get inventory in line for spring merchandise. Gross margins were better than forecast and increased for the ninth time in 10 quarters. Higher prices are not part of the formula, according to management, just getting a better product mix in front of the customer.

Wal-Mart's performance should frighten its peers both in supermarkets and broader retail. Safeway (NYSE: SWY), Albertson's (NYSE: ABS), and Kroger (NYSE: KR) all have narrower margins and would die for Wal-Mart's 26% increase in supermarket sales for the quarter. Supermarket sales at existing stores logged double-digit gains -- something not even its largest competitors can match.

Remarkably, Wal-Mart's operating margins nearly double those of Costco (Nasdaq: COST). Target (NYSE: TGT) does manage higher margins, but also has more debt, as reflected in a ratio of long-term debt to equity of 110% compared to 40% for Wal-Mart. Management also repurchased $5.2 billion in its own stock and added cash to the balance sheet.

All this shock and awe doesn't come cheap. At 29 times trailing earnings, Wal-Mart's execution is clearly reflected in the stock price. Still, with guidance calling for more double-digit earnings growth, retail investors can find value in Wal-Mart, especially given the paltry operating margins and lower growth exhibited by many of its peers.

Is Wal-Mart the bully on the block or capitalist manna? Talk it over with other Fools on the Wal-Mart discussion board.

Fool contributor W.D. Crotty does not own stock in any of the companies mentioned. W.D. helps Wal-Mart with repeated trips to Sam's and the local Supercenter.