Wal-Mart posts in-line quarter

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Wal-Mart Stores Inc. (WMT) today posted results that under normal circumstances would be considered mediocre but are extraordinary given the current state of the economy.

Net income was $3.03 billion, or 77 cents per share, little changed from a year earlier. Sales for the first quarter were $93.471 billion, down 0.6 percent from $94.042 billion in the first quarter last year. The profit was at the high end of Wal-Mart's guidance of 72 cents to 77 cents. Currency exchange rates lopped off about four cents from earnings and sales would have jumped 4.5 percent on a constant currency basis.

Shares of the Bentonville, Arkansas-based company have dropped 11 percent since the start of the year. The stock, one last year's standout performers, was trading up in pre-market trading. Total U.S. comparable same-store sales rose 3.7 percent excluding fuel.

As Bloomberg News noted, "Wal-Mart's U.S. stores lowered prices of canned soups, cosmetics and Procter & Gamble Co.'s Tide laundry detergent to lure more shoppers battered by rising unemployment and sinking home values." Retailers are benefiting from a rebound in consumer confidence even though Wednesday's retail sales report was disappointing and data showed that April consumer spending fell. People are "trading down " to Wal-Mart from rival chains such as Target Corp. (TGT) and Costco Wholesale Corp. (COST).

Wal-Mart expects profit in the current quarter of 83 cents to 88 cents per share. That compared with an average analyst estimate of 85 cents, according to Bloomberg.. The retailer forecast cmparable sales at U.S. stores and the Sam's Club membership warehouse division may rise as much as 3 percent in the 13 weeks through July 31, Wal-Mart said.

Chief Executive Mike Duke said he was pleased that the company's 2010 fiscal year had gotten off to such a strong start.

"When economic conditions improve, we believe customers who shop Wal-Mart today will stay with us, because of the business improvements we're making and continue to make," said Duke in the earnings release. "Across the company, we are building our brand by reducing costs, sharpening our merchandising and updating our stores."

The strategy appears to be paying off.

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