Wal-Mart profit rises, raises outlook
Wal-Mart Stores second-quarter net income rose 5.7 per cent as the world's largest retailer attracts frugal shoppers by discounting already low prices.
The discounter said it was raising its full-year profit outlook.
Quarterly came in short of expectations and disappointed investors, who sent the company's stock down in premarket trading.
Wal-Mart's results are considered an economic bellwether because the company draws nearly 10 per cent of nonautomotive retail spending in the US.
In its latest report, the discounter said its low-income shoppers were still having trouble stretching their dollars to the next payday. But Wal-Mart's focus on rock-bottom prices was paying off.
Wal-Mart has had to work hard to get shoppers back. The stores, which thrived during the recession as more well-off people started shopping there, then struggled as their core low-income customers were hit hard by lingering joblessness and other challenges in a slow economic recovery.
Wal-Mart's US stores, which account for 60 per cent of the company's revenue, had also turned off shoppers by veering away from its "everyday low prices" strategy and getting rid of popular merchandise.
But Wal-Mart last year began adding back 10,000 products and refocused on keeping prices low throughout the store, backing the strategy with TV campaigns. It has done that by cutting expenses and passing some of the savings on to customers. As a result, revenue at Wal-Mart's US division rose 3.8 per cent to $67.35 billion in the latest quarter.
Revenue at stores open at least a year - considered a key measure of a retailer's health because it excludes the impact from stores that open and close during the year - rose 2.2 per cent in the division, excluding fuel. The figure, which beat the 2.1 per cent Wall Street estimate, marks the fourth consecutive quarterly gain for the division after nine straight quarters of declines.
Customer traffic increased for the third straight quarter, the company said.
For the overall US business, revenue at stores opened at least a year rose 2.5 per cent, including a 4.7 per cent increase at the company Sam's Club warehouses. Analysts had expected 2.6 per cent.
"The paycheque cycle remains pronounced in the United States and in our international markets, "Mike Duke, Wal-Mart's president and CEO, said in a statement. "Given continuing economic pressures, we believe that our price leadership and value are growing in importance to customers across income levels."
Wal-Mart's international business, which produces more than a quarter of its revenue, has remained strong, but the company is striving to make it more profitable. Wal-Mart is focusing on improving its business in Brazil and China. The company's international business increased 6.4 per cent to $32.01 billion in the quarter. Even in Britain, which has been grappling with a recession, Wal-Mart has said it has seen shoppers flocking to its stores because of its low prices.
Wal-Mart reported net income of $US4.02 billion ($3.84 billion), or $US1.19 a share, for the quarter ended July 31. That compares with $US3.80 billion, or $US1.09 a share, a year ago.
Revenue excluding membership fees at Sam's Club rose 4.5 per cent to $US113.53 billion.
Analysts had expected earnings of $US1.17 per share on revenue of $US114.63 billion.
The company said it expects third-quarter net income between $US1.04 a share and $US1.09 a share. Analysts had expected $1.05. For the full year, the company now expects earnings a share to be in the range of $US4.83 to $US4.93. That is up from Wal-Mart's original forecast of $US4.72 to $US4.92 a share. Analysts had expected $4.93.
The company continues to deal with allegations of bribery in its Mexico operations, which could threaten momentum in its international business, Wal-Mart's fastest-growing division.