Wal-Mart posts flat 2Q profit, beats expectations

[August 13, 2009]  NEW YORK (AP) -- Wal-Mart Stores Inc. on Thursday reported second-quarter income virtually unchanged from a year ago, but results beat Wall Street expectations.

The world's largest retailer also raised the low end of its profit outlook as it benefits from a series of cost-cutting moves and draws frugal shoppers away from rivals.

Wal-Mart earned $3.44 billion, or 88 cents per share, in the quarter ended July 31. That compares with $3.45 billion,or 87 cents per share, in the year-ago period. Revenue fell 1.4 percent to $100.08 billion.

Analysts surveyed by Thomson Reuters projected earnings per share of 85 cents on revenue of $102.9 billion.

Wal-Mart shares rose $1.11 to $51.62 in premarket trading, after closing at $50.51 Wednesday.

But same-store sales, or sales at stores opened at least a year, slipped 1.2 percent during the period. That figure provides the first glimpse of a key sales measurement in the quarter, because Wal-Mart stopped reporting those figures on a monthly basis after announcing April results.

"In a sales environment more difficult than we expected, we managed our operations in a disciplined manner," Mike Duke, president and chief executive, said in a statement. "Our U.S. segments delivered strong inventory performance, which contributed to the company's healthy increase in year-over-year earnings. We are accelerating our focus on reducing our expenses."

Wal-Mart has been one of the few bright spots in retailing this year, benefiting from shoppers focusing on necessities during the recession. But a big part of its success in drawing new customers away from higher-priced stores has been largely due to its low prices and its efforts to clean up stores and improve merchandise. That all came together just as the economy started to sour.

Now Wal-Mart is embarking on an ambitious store remodeling plan and is sprucing up its merchandise even more in the hope of retaining its new customers after the economy recovers. It plans to redo up to 600 stores this fiscal year at a cost of $1.6 billion to $1.7 billion.

The new store format includes lower shelving that will make it easier to see across the store, better lighting and wider aisles. The chain also is adding more brands and expanding its electronics offerings.

But Wal-Mart shares, which soared 20 percent last year, have fallen 11 percent since the beginning of the year as investors turn to the beaten-down shares of more upscale companies like Williams Sonoma Inc., which Wall Street believes didn't have much further to fall and could benefit when shoppers start spending again.

Against this challenging environment, Wal-Mart said that same-store sales should be anywhere from unchanged to up 2 percent in the third quarter ended Oct. 30.

Wal-Mart boosted the low end of its annual profit guidance to a range of $3.50 to $3.60 per share, from $3.45 to $3.60 per share. Analysts surveyed by Thomson Reuters predict $3.56 per share.

For the third quarter, Wal-Mart expects earnings per share between 78 cents and 82 cents per share, including a 3-cent negative impact from currency exchange rates. Analysts surveyed by Thomson Reuters expect 80 cents per share.

[Associated Press; By ANNE D'INNOCENZIO]

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