Belt-tightening Shoppers Help Wal-Mart Beat Own Expectations on Q2 Profits

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Belt-tightening Shoppers Help Wal-Mart Beat Own Expectations on Q2 Profits

Shoppers pursuing lower prices and one-stop shopping to ease the hurt of high gas prices helped Wal-Mart beat its own performance projections for its fiscal 2008 second quarter ended July 31, with net income rising 17 percent. While the company raised its full-year 2008 forecast, however, it also predicted slower sales at existing stores looking forward.

Second quarter same store sales gained 4.5 percent, up from a 1.9 percent increase last year. However, Wal-Mart predicted same store sales growth would slow in the third quarter to between 1 and 2 percent.

The retailer offered economy-related cautions. "We still see sales volatility around paycheck cycles," said Tom Schoewe, chief financial officer, referring to the pullback in spending before paychecks arrive and the spike after payday when shoppers have the cash to buy.

Wal-Mart's net income climbed to $3.45 billion or 87 cents a share, from $2.95 billion or 72 cents a share last year. Revenue increased 10.4 percent to $101.6 billion, from $92 billion for the year ago.

Continuing operations profit totaled $3.39 billion versus $3.09 billion. Wal-Mart said its second quarter benefited from a lift of 4 cents per share due to some one-time items.

"We have improved customer traffic and ticket and overall sales growth in our markets," said Lee Scott, president and c.e.o. of the Bentonville, Ark. Retailer. "While inflation and higher fuel costs are pressuring suppliers, retailers and customers worldwide, we're confident that Wal-Mart is well positioned for this economy." 

Wal-Mart said on Thursday that it is drawing market share from competitors and expects to keep its new customers even when the economy improves.

The company's earnings report showed that Wal-Mart's multiyear plan to change its strategy and refocus on low prices, improve merchandise mix, clean up stores, and provide friendlier, fast service appears to be working. It raised its third-quarter profit outlook from 73 cents to 76 cents a share. Citing inventory controls and other cost cutting measures, the discounter raised its full year forecast to a range of $3.43 to $3.50 per share, up from February's forecast of $3.30 to $3.43.

International business helped drive second quarter sales, as economic problems spread to other areas of the world and more customers sought lower prices. International sales rose 19.3 percent to $25.3 billion, due mainly to gains in Canada, China and Brazil.