Tough times good for Wal-Mart

Wal-Mart by the numbers

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NEW YORK (CNNMoney.com) -- Wal-Mart Stores edged past forecasts in what it termed a good start to its fiscal year, as it said that tough economic times helped sales at the discount leader.

Wal-Mart (WMT, Fortune 500), the world's largest retailer and the nation's largest company by revenue, earned $3.02 billion, or 76 cents a share, up from $2.83 billion, or 68 cents a share. That's a penny a share better than the consensus forecast of analysts surveyed by earnings tracker Thomson First Call.

Revenue rose 10.2% to $94.1 billion. Analysts had been forecasting revenue of $93.5 billion.

"We're off to a solid start, with record first-quarter sales and earnings," a statement from CEO Lee Scott said. "Our business is even more relevant to our customers today, given the current economic pressures."

On a Web-cast discussion about first-quarter earnings, chief executive of U.S. stores Eduardo Castro-Wright said that Wal-Mart has continued to find success through difficult economic conditions, because the company is able to match price-conscious customers' demand for cost-cutting as they focus on necessary purchases like food and daily-use items.

To reel in customers that are strapped for cash, Wal-Mart continued a low-cost prescription drug program and began advertising "$10 meal solutions" in the first-quarter. But after food and drug purchases, many customers are still continuing to buy discretionary items like DVDs and electronics.

"Customers do shop for what they want, not just what they need," said Castro-Wright. "They are making room for entertainment products, especially as they stay home more often."

U.S. same-store sales were up 2.9% in the quarter, which is the company's best performance in that category in 2 years.

Wal-Mart's revenue was also largely helped by sales abroad. International sales grew 22% from the year-ago period as foreign currencies strengthened, making imports cheaper for customers abroad.

But the company's second-quarter earnings guidance of 78 to 81 cents a share is only at or below the current First Call forecast of 81 cents.

"The economy is playing a critical factor in 2008," said Scott on the Web-cast. "Customers everywhere are concerned about rising energy costs, food inflation, home values, and other factors tied to the global economy."

The cautious guidance comes even as stimulus checks arrive in bank accounts of 130 million Americans in the second-quarter. But Wal-Mart said the company was still unsure how much it would benefit from the tax rebates.

"While there is potential for short term impact from the stimulus checks in the U.S., it is currently difficult to quantify what kind of impact this money could have on Wal-Mart's sales," added Scott.

Wal-Mart's skeptical outlook is supported by trade group National Retail Federation. NRF said Tuesday consumers are planning to spend less of their rebate checks on discretionary items like electronics and apparel because of the rising prices of gas and groceries.

Though NRF said consumers still plan on spending 40% of their rebate checks, the group said many more shoppers now plan on using the check for food and gasoline than they had when the stimulus program was first announced in February.