Wal-Mart profit jumps but outlook cut

Wal-Mart profit jumps but outlook cut

	Published : Tue, 14 Aug 2007 15:14 By : Agencies Print this Story

NEW YORK (AP) - Wal-Mart Stores Inc. reported a 49 percent increase in second-quarter profits, but the world's largest retailer cut its profit outlook amid weak economic conditions that are crimping consumer spending globally.

Shares fell more than 4 percent, or $2.07, to $44.10 at the open of trading Tuesday.

The Bentonville, Ark.-based discounter reported a net income of $3.10 billion, or 76 cents per share, for the three months ended July 31. That compared with $2.08 billion, or 50 cents per share in the year-ago period.

The quarter included three items that provided a net benefit of $171 million after tax, or 4 cents per share. Accruals for general liability and workers' compensation claims were reduced by $196 million after tax. The company also recognized $41 million in after tax gains from the sale of real estate. These benefits were offset by charges of $66 million after tax for legal and other contingencies.

Analysts polled by Thomson Financial expected 76 cents per share.

Wal-Mart reported revenue of $93.01 billion, up from $85.43 billion in the year-ago period. Analysts had expected $92.68 billion in the quarter.

'Our underlying operating performance this quarter is not what we expect of ourselves, and not what our shareholders expect of us,' said Lee Scott, Wal-Mart president and chief executive officer in a statement. 'For the remainder of this year, our management team is focused on inventory improvements, delivering quality products at low prices, and store execution at the highest standards.'

Scott said its customers are under a lot of economic pressure and promised that Wal-Mart would keep prices down.

Wal-Mart has been dogged by the crumbling housing market, a widening credit crunch and higher gasoline and food prices, which have hit lower-income consumers particularly hard.

Tom Schoewe, Wal-Mart's executive vice president and chief financial officer, said that he saw bigger spending swings around the time when people usually get paychecks than he had in the past. That suggests are under more financial pressure than usual.

But the retailer's sales, particularly in apparel and home furnishings, have also been sluggish because of its own merchandising mistakes. Wal-Mart, which downplayed discounts last year, has in recent months stepped up price cuts. This fall, it announced price cuts on 16,000 items to boost sales in the critical back-to-school season.

While overall back-to-school sales have been encouraging, Wal-Mart said that it would not see an improvement in apparel or home furnishings until the third quarter of this year.

On Tuesday , the company reported that same-store sales or sales at stores opened at least a year rose a slim 1.9 percent for the quarter. The results excluded sales of fuel. Same-store sales or sales at stores opened at least a year are considered a key barometer of a retailer's health.

At Wal-Mart's namesake stores, same-store sales rose 1.2 percent, while at Sam's Clubs, same-store sales rose a robust 5.9 percent.

One area of concern is the international division, which had been a buffer to weak domestic sales. Wal-Mart said that it is seeing the same economic pressures internationally, particularly Mexico. On Tuesday, the company reported that the international division's operating income rose 5.1 percent, while Wal-Mart stores rose 3.8 percent. Sam's Club's operating division rose 11.2 percent.

The company said that for the full year, earnings per share from continuing operations is now estimated to be between $3.05 per share and $3.13 per share. The company's initial forecast was in the range of $3.15 per share and $3.23 per share.