The company raised its full-year forecast but said that its customers worldwide are feeling economic pressure and suppliers are pressing for price increases. It also said that investments to update systems for merchandising, finance and human resources will continue to meet headwinds for the rest of the year and for several years to come.
Net income at the world's biggest retailer rose to $3.45 billion, or 87 cents a share, from $2.95 billion or 72 cents a share a year earlier, the Bentonville, Ark.-based retailer reported. Revenue rose 10.4% to $102.7 billion.
WMT 58.68, +0.80, +1.4%) said it would have earned 86 cents a share. On that basis, analysts on average estimated that Wal-Mart would earn profit of 83 cents a share on sales of $101.8 billion, according to FactSet. It also has forecast a slower sales-growth rate in August and warned that shoppers are spending more cautiously with the last of the government's stimulus checks mailed out.
The company estimates a third-quarter profit of 73 cents to 76 cents a share and raised its full-year expectation to $3.43 and $3.50 from an earlier projection of as much as $3.43 a share. Analysts surveyed by FactSet estimated profit of 76 cents a share in the third quarter and $3.49 for the year.
"The guidance is appropriate," said Goldman Sachs analyst Adrianne Shapira in an interview. "It's tough out there. Their execution is very strong, and that won't fade."
Shares of Wal-Mart, part of the Dow Jones Industrial Average, rose 0.1% to $57.94 in midday trading. They've risen 22% this year, compared with a 4.2% decline in the S&P Retail Index.
'They've gone back to their roots. You have to give management some credit.'
— Matt Finn, Thrivent Investment Management
The economic downturn that's started in North America has spread to Europe and even to emerging markets, affecting Wal-Mart's customers and leading shoppers to change their behaviors like buying cheaper cuts of meat; in Puerto Rico, customers are eating more sandwiches and buying more private-label merchandise in the United Kingdom. In turn, rising food and energy costs are squeezing Wal-Mart's suppliers and leading them to pass price increases along to retailers, Chief Executive Lee Scott said Thursday in a previously recorded call.
Wal-Mart is managing inventory, keeping growth rate at less than half the rate of sales and leveraging its global-sourcing clout to keep costs down, according to Scott. He said that lowering capital spending also has allowed Wal-Mart to keep prices low.
In the United States, Wal-Mart has increased the number of temporary price cuts, known as rollbacks, in groceries to mitigate price increases, said the head of its namesake chain's U.S. business, Eduardo Castro-Wright.
"We continue to be diligent that any price increase is justified," Scott said on the call. "There's a great deal of pressure on the customers. What we see is a global economy that's difficult."
Strategy's working
Wal-Mart has benefited from its strategy of offering low prices, using its slogan "Save money. Live better" to lure economy-battered shoppers. It also has benefited from cashing 2.9 million of the U.S. government's tax-rebate checks and improving store layouts to make it easier to shop.
To spur the company's lagging apparel and home-goods sales after it failed to draw more higher-end shoppers, Wal-Mart has returned its focus to price and unveiled exclusives such as Hannah Montana, Ocean Pacific and l.e.i. junior apparel lines and Canopy bed sheets, analysts said.
U.S. sales at stores open at least a year rose 4.5%, excluding the impact of fuel sales and exceeding the company's own internal projection. Wal-Mart chain stores were up 4.6% while Sam's Club rose 3.7%, excluding fuel.
The company also has touted meals for families of four for under $10, clothing below $10 and attractions such as $4 generic-prescription drugs. In addition to exclusive products, Wal-Mart made itself a more-desirable shopping destination by adding major brands like Sony and Apple to its electronics lineup, according to analysts.
'There's a great deal of pressure on the customers. What we see is a global economy that's difficult.'
— CEO Lee Scott
"They have a strong competitive position," said Matt Finn, who helps manage $73.2 billion in assets at Thrivent Investment Management, which owns shares of Wal-Mart. "Their apparel is doing better than they've been for years. They've gone back to their roots. You have to give management some credit."
Net income at the world's biggest retailer rose to $3.45 billion, or 87 cents a share, from $2.95 billion or 72 cents a share a year earlier, the Bentonville, Ark.-based retailer reported. Revenue rose 10.4% to $102.7 billion.
WMT 58.68, +0.80, +1.4%) said it would have earned 86 cents a share. On that basis, analysts on average estimated that Wal-Mart would earn profit of 83 cents a share on sales of $101.8 billion, according to FactSet. It also has forecast a slower sales-growth rate in August and warned that shoppers are spending more cautiously with the last of the government's stimulus checks mailed out.
The company estimates a third-quarter profit of 73 cents to 76 cents a share and raised its full-year expectation to $3.43 and $3.50 from an earlier projection of as much as $3.43 a share. Analysts surveyed by FactSet estimated profit of 76 cents a share in the third quarter and $3.49 for the year.
"The guidance is appropriate," said Goldman Sachs analyst Adrianne Shapira in an interview. "It's tough out there. Their execution is very strong, and that won't fade."
Shares of Wal-Mart, part of the Dow Jones Industrial Average, rose 0.1% to $57.94 in midday trading. They've risen 22% this year, compared with a 4.2% decline in the S&P Retail Index.
'They've gone back to their roots. You have to give management some credit.'
— Matt Finn, Thrivent Investment Management
The economic downturn that's started in North America has spread to Europe and even to emerging markets, affecting Wal-Mart's customers and leading shoppers to change their behaviors like buying cheaper cuts of meat; in Puerto Rico, customers are eating more sandwiches and buying more private-label merchandise in the United Kingdom. In turn, rising food and energy costs are squeezing Wal-Mart's suppliers and leading them to pass price increases along to retailers, Chief Executive Lee Scott said Thursday in a previously recorded call.
Wal-Mart is managing inventory, keeping growth rate at less than half the rate of sales and leveraging its global-sourcing clout to keep costs down, according to Scott. He said that lowering capital spending also has allowed Wal-Mart to keep prices low.
In the United States, Wal-Mart has increased the number of temporary price cuts, known as rollbacks, in groceries to mitigate price increases, said the head of its namesake chain's U.S. business, Eduardo Castro-Wright.
"We continue to be diligent that any price increase is justified," Scott said on the call. "There's a great deal of pressure on the customers. What we see is a global economy that's difficult."
Strategy's working
Wal-Mart has benefited from its strategy of offering low prices, using its slogan "Save money. Live better" to lure economy-battered shoppers. It also has benefited from cashing 2.9 million of the U.S. government's tax-rebate checks and improving store layouts to make it easier to shop.
To spur the company's lagging apparel and home-goods sales after it failed to draw more higher-end shoppers, Wal-Mart has returned its focus to price and unveiled exclusives such as Hannah Montana, Ocean Pacific and l.e.i. junior apparel lines and Canopy bed sheets, analysts said.
U.S. sales at stores open at least a year rose 4.5%, excluding the impact of fuel sales and exceeding the company's own internal projection. Wal-Mart chain stores were up 4.6% while Sam's Club rose 3.7%, excluding fuel.
The company also has touted meals for families of four for under $10, clothing below $10 and attractions such as $4 generic-prescription drugs. In addition to exclusive products, Wal-Mart made itself a more-desirable shopping destination by adding major brands like Sony and Apple to its electronics lineup, according to analysts.
'There's a great deal of pressure on the customers. What we see is a global economy that's difficult.'
— CEO Lee Scott
"They have a strong competitive position," said Matt Finn, who helps manage $73.2 billion in assets at Thrivent Investment Management, which owns shares of Wal-Mart. "Their apparel is doing better than they've been for years. They've gone back to their roots. You have to give management some credit."
1 comment:
Im not a big fan of walmart.
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