Wal-Mart 2Q Profit Up; Full-Year Forecast Dimmed

Wal-Mart Stores Inc. (WMT), the world's largest retailer, reported a lower-than-expected quarterly profit and cut its full-year earnings forecast Tuesday, saying its customers remain under economic pressure.

The company's Shares fell 2.5 percent to $45 early electronic composite trading.

Earnings rose to $3.1 billion, or 76 cents per share, in the second quarter ended July 31, from $2.08 billion, or 50 cents per share, a year earlier, when the company took a charge for selling its German stores.

Earnings per share from continuing operations were 72 cents per share before a gain of 4 cents. Analysts on average were expecting 76 cents, according to Reuters Estimates.

Chief Executive Lee Scott blamed the disappointing performance on economic pressure around the world.

"It is no secret that many customers are running out of money toward the end of the month," Scott said on a recorded conference call, adding that higher fuel prices, interest rates, utility costs and "more financial pressure" are hurting sales in its international market, including Mexico and Canada.

With more than 127 million customers visiting a Wal-Mart store or a Sam's Club location in America every week, Wal-Mart is considered a barometer of the health of the U.S. retail sector.

But Wal-Mart has been struggling with slowing U.S. sales growth and announced plans earlier this year to cut the number of U.S. supercenters it will open to try to boost sales.

It has also returned to emphasizing its low prices after efforts last year to play down its discount roots backfired with its core low income shoppers.

For this back-to-school shopping season, which began in July,it has slashed prices on thousands of items by as much as 50 percent to boost sales at its U.S. stores. The retailer said last week that while the price cuts attracted shoppers, they also hurt margins.

On the recorded call, Eduardo Castro-Wright, CEO of Wal-Mart's U.S. operations, said the company continues to struggle with poor apparel sales and is cutting prices to move out merchandise.

He also said strong sales of low-margin items like groceries and weak sales of higher-margin goods like clothes are hurting profit margins.

Second-quarter sales were $91.99 billion, up almost 9 percent from a year ago.

U.S. sales at stores open at least a year, a key retail gauge known as same-store sales, rose 1.9 percent in the quarter. Same-store sales at its namesake Wal-Mart stores rose 1.2 percent, while they increased 5.9 percent at its Sam's Club warehouse divisions.

For its third-quarter, Wal-Mart forecast earnings per share of 62 cents to 65 cents from continuing operations, while analysts on average were expecting 68 cents.

For the full year, the company said it expected earnings of $3.05 to $3.13 per share from continuing operations, down from an earlier view of $3.15 to $3.23. Analysts were expecting $3.16.

Through Monday, Wal-Mart shares were almost flat this year, while close rival Target Corp.was up almost 11 percent and the S&P Retail Index had fallen more than 5 percent.