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Wal-Mart Stores yesterday reported a 17 percent rise in quarterly profit and raised its view on full-year earnings as shoppers sought low prices on food, healthcare products and electronics.

August 15, 2008

By Nicole Maestri

New York – Wal-Mart Stores yesterday reported a 17 percent rise in quarterly profit and raised its view on full-year earnings as shoppers sought low prices on food, healthcare products and electronics.

But the world’s largest retailer forecast profit for the current quarter that could miss Wall Street targets. Wal-Mart shares rose 1.2 percent to $58.60 (R460) in premarket trading.

The company cited a high degree of pressure on customers from the combination of high fuel costs and food inflation. It continued to see sales volatility from week to week.

“What we see, as do many around the world, is a global economy that is difficult,” said chief executive Lee Scott.

“When energy and oil prices go up on top of inflation and healthcare and core food items, there’s a great deal of pressure on the customer.”

Wal-Mart’s net income rose to $3.45 billion in the second quarter, which ended last month, from $2.95 billion a year earlier.

Earnings per share from continuing operations increased to 86c from 75c. Analysts on average had been expecting 84c, according to Reuters Estimates.

Wal-Mart’s forecast of third-quarter earnings per share from continuing operations was between 73c and 76c, while analysts on average had expected 76c.

Joseph Feldman, a retail analyst with the Telsey Advisory Group, said investors might be disappointed by Wal-Mart’s forecast, given the strong profit rise in the second quarter.

“Investors may read this negatively and will want to better understand if the company is being overly cautious or the outlook has slowed,” said Feldman.

“If the outlook has slowed, I view that as bad news for all retailers,” he added.

In the past year, Wal-Mart has benefited both from internal efforts to improve its business model and from a weak US economy, which is driving shoppers to its nationwide outlets in search of bargains.

The discount retailer also received a boost in the quarter from US tax rebate cheques as shoppers spent the excess cash, but its sales waned later.