Global Biz

Wal-Mart tops view; key US sales down 1.1%

(Agencies)
Updated: 2011-05-18 10:27
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CHICAGO - Wal-Mart Stores Inc posted a bigger-than-expected jump in quarterly profit on Tuesday, as strength overseas mitigated the continued pressure it felt in the United States, where its same-store sales have now fallen for two years,

Wal-Mart's core US shoppers are still stretched and have concerns about rising gas, energy and food prices, as well as employment issues. At the same time, small business owners who shop at its Sam's Club warehouse stores remain concerned about the economy and their access to credit.

Shares of Wal-Mart, the world's largest retailer, slipped 0.4 percent to $55.82 in premarket trading.

US same-store sales fell 1.1 percent, in line with the company's forecast of a drop of 2 percent to flat and slightly better than the average 1.3 percent decline expected by analysts according to Thomson Reuters.

"We recognize we still have work to do and comp sales growth remains the greatest priority for me and the entire Walmart US team," Wal-Mart Chief Executive Officer Mike Duke said in a recorded call.

US pressures persist

While US same-store sales were within guidance, such sales still fell, which "tells us other players continue to steal market share," said Wall Street Strategies analyst Brian Sozzi.

Wal-Mart continues to see a paycheck cycle, and shoppers kept trading down to lower priced items and some private label goods, Walmart US Chief Executive Bill Simon said.

Most of the decline in first-quarter US same-store sales came from a drop in traffic in the stores, while the average that shoppers spent was up. Same-store sales of groceries and health and wellness items increased.

Walmart is not doing a good enough job getting people who come in for groceries to also buy clothing at its stores, and weather hurt sales of outdoor goods, Simon said.

Wal-Mart is not the only one feeling pressure from bad weather. Home improvement chains Home Depot Inc and Lowes Cos Inc saw weak spring demand.

Wal-Mart earned $3.4 billion, or 98 cents per share, in the first quarter that ended on April 30, up from $3.3 billion, or 87 cents per share, a year earlier.

The company had forecast per-share earnings of 91 cents to 96 cents and the analysts' average estimate was 95 cents, according to Thomson Reuters I/B/E/S.

Sales rose 4.4 percent to $103.42 billion, topping Wall Street's average forecast of $102.93 billon.

International sales soared 11.5 percent. At Asda, its British arm, sales growth almost ground to a halt.

The company forecast second-quarter earnings of $1.05 to $1.10 per share, up from 97 cents a year earlier. It expects US same-store sales to be down 1 percent to up 1 percent.

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