Walmart Climbs 17% Higher on Profit !

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."

Oil Rise , Again After Iran Missle Test

Most U.S. Stocks Retreat, Led by Financials, Technology Shares

By Eric Martin

July 9 (Bloomberg) -- Most U.S. stocks declined after Fannie Mae's borrowing costs climbed, analysts said a slowing economy may hurt sales at technology companies and oil prices rose for the first time this week.

Freddie Mac and Fannie Mae, the largest sources of financing for U.S. home loans, posted the steepest declines in the Standard & Poor's 500 Index after Fannie sold $3 billion in notes at higher yields than in past offerings. Cisco Systems Inc. tumbled as UBS AG said the world's biggest maker of computer-networking equipment faces a slowdown in the U.S. and Europe. Continental Airlines Inc. and Wal-Mart Stores Inc. fell as crude advanced. Alcoa Inc. climbed, limiting the market's retreat, after posting earnings that topped estimates.

Eight stocks fell for every seven that gained on the New York Stock Exchange. The Standard & Poor's 500 Index added 1.53 points, or 0.1 percent, to 1,275.23 at 10:31 a.m. in New York. The Dow Jones Industrial Average declined 4.95 to 11,379.24. The Nasdaq Composite Index lost 4.26 to 2,290.18.

``The bottom line is that we are in an environment where there is a high degree of uncertainty,'' said Ian Harnett, an equity strategist at Absolute Strategy Research in London. The high oil price means ``there is a lot of risk out there.''

Profits at S&P 500 companies are forecast to decline 11 percent on average in the second quarter, according to the average estimate of analysts surveyed by Bloomberg. Income is projected to slump 60 percent on average at financial companies.

Global stock markets have erased more than $11 trillion this year as record oil prices and more than $400 billion in credit- related losses threatened to push the U.S., the world's largest economy, into recession.

Fannie, Freddie Slump

Fannie Mae slipped $1.17, or 6.6 percent, to $16.45. Freddie Mac lost $1.04, or 7.7 percent, to $12.42. Fannie's 3.25 percent notes, which mature Aug. 12, 2010, priced to yield 3.27 percent, or 74 basis points more than comparable U.S. Treasuries. Fannie last month sold $4 billion of 3 percent benchmark notes maturing July 12, 2010, that priced to yield 3.036 percent, or 65 basis points more than U.S. Treasuries of similar maturity. A basis point is 0.01 percentage point.

Fannie and Freddie, which are rated Aaa by the world's largest credit-rating companies, are being treated by derivatives traders as if they are rated five levels lower. Credit-default swaps tied to $1.45 trillion of debt sold by the two are trading at levels that imply the bonds should be rated A2 by Moody's Investors Service, according to data compiled by the firm's credit strategy group.

Bank of America Corp., the second-biggest U.S. bank by market value, lost 18 cents to $23.36. Regions Financial Corp., Alabama's biggest bank, declined 29 cents to $10.66.

Dividend Concern

Credit Suisse Group AG lowered its share-price forecasts for the banks and said as many as 40 percent of the top 50 U.S. regional lenders may be forced to cut their dividends or raise ``more expensive and dilutive forms of capital over the next few quarters.''

Cisco Systems declined 62 cents, or 2.7 percent, to $22.26. The world's biggest maker of computer-networking equipment may say fourth-quarter revenue was ``flat to down'' from the third quarter, according to UBS AG.

``Enterprise spending remains challenging and there has been further slowing in the U.S., especially in the West Coast region,'' New York-based UBS analyst Nikos Theodosopoulos wrote in a report today. ``We also see Europe slowing from last quarter.''

Intel lost 45 cents, or 2.2 percent, to $20.47. The world's biggest maker of computer chips may fail to beat earnings estimates in the second half as some customers curb spending and Advanced Micro Devices Inc. introduces new products, Merrill said.

Oil Climbs

Continental dropped 60 cents, or 5.9 percent, to $9.64. Wal- Mart, the biggest retailer, tumbled 97 cents to $58.14.

Crude oil for August delivery rose $1.28, or 0.9 percent, to $137.32 a barrel in New York. Futures tumbled 6.4 percent the past two days, the biggest two-session decline since March 19 and 20. Prices are still up 90 percent from a year ago.

Alcoa, the first company in the Dow to report second-quarter results, climbed $1.26 to $33.59. The company's profit excluding certain items of 71 cents a share, topping the 65-cent average estimate of 17 analysts in a Bloomberg survey.

Mattson Technology Inc. fell 41 cents to $4.51. The provider of equipment used to make semiconductors said its second-quarter loss was wider than it predicted because of ``protracted weakness'' in the chip market.

Mohawk Industries Inc. sank 78 cents to $64.12. The U.S. carpet and tile maker said second-quarter earnings may be $1.23 to $1.26 a share, compared with a previous forecast of $1.36 to $1.45, as the housing market deteriorates.

U.S. shares rallied yesterday, sending the S&P 500 to its steepest advance in a month. Banks and transportation companies led gains after JPMorgan Chase & Co.'s chief executive officer said the credit crisis will ease and oil posted its biggest drop since March.