Wal-Mart profit ticks up, but sales slip

NEW YORK (CNNMoney.com) -- Wal-Mart Stores, the world's largest retailer, reported fiscal first-quarter earnings Thursday that met analyst expectations, although sales declined from a year earlier.

Wal-Mart (WMT, Fortune 500) logged a profit of 77 cents a share in the quarter ended April 30, up from 76 cents a year earlier, matching analysts' forecasts, according to Thomson Reuters.

But the retailer blamed fluctuations in currency rates for hurting net sales for its international operations. Citing an 11% drop in net international sales, Wal-Mart said total company sales totaled $93.5 billion for the quarter, a slight decrease of 0.6% from $94 billion a year ago.

Without the negative impact of currency exchange rates, the company said its net sales for the quarter would have increased 4.5% to about $98.3 billion in the period.

The retailer also issued an upbeat forecast for its second quarter, saying it expects to log a profit of between 83 to 88 cents a share. Analysts currently expect the company to earn 85 cents a share.

However, company executives cautioned that Wal-Mart's U.S. business in the second quarter will be up against the sales gains posted last year from the economic stimulus checks that were sent out to households in the second quarter.

Recession's impact: Unlike most of its peers, Wal-Mart has benefitted from the recession as consumers across all income levels trade down on prices and shop at the discounter for everyday goods.

In April, the company reported a same-store sales increase of 5%. Same-store sales are a key gauge of a retailer's performance and measure sales at stores open at least a year.

Wal-Mart's same-store sales gain in the month trounced that of rivals Costco (COST, Fortune 500) and Target (TGT, Fortune 500), indicating that Wal-Mart is also growing its market share amid the economic downturn.

For the quarter, the retailer logged a same-store sales increase of 3.7%, excluding gasoline purchases.

Wal-Mart announced last week that it will no longer offer same-store sales reports on a monthly basis, putting them out quarterly instead.

For the second quarter, the company expects to see same-store sales flat to up 3% from a year ago.

At least one analyst said Wal-Mart's same-store sales gains in the first quarter, coupled with its second-quarter sales guidance, could indicate that the weakness in consumer spending may have bottomed.

Retail economists often look to Wal-Mart as a barometer of the economy and the health of the consumer given that more than 200 consumers shop at Wal-Mart's discount stores every week.

"In hindsight, it may be clear that the turning point began in the first quarter," said Deutsche Bank North America analyst Bill Dreher, who has a "buy" rating on Wal-Mart with a $64 price target on the stock.

"We were very worried that Wal-Mart would issue a negative [same-store] sales guidance for the second quarter. It's very encouraging that they didn't," Dreher said.

Beyond groceries: Dreher said one of Wal-Mart's goals is to get its customers to shop not just for low-priced groceries but across discretionary merchandise, including home. clothing and electronics.

"With the demise of Linens 'N Things, there's opportunity for Wal-Mart to grab some of the market share in the home good area," he said. "We're looking forward to following their progress on that front.

In a pre-recorded call to discuss the results, Wal-Mart CEO Mike Duke said he was confident that the recent sales increases won't slow down if the recession ends

"This isn't a short-term phenomenon," Duke said in the call. "We believe customers' behavior and mindset has changed. When economic conditions improve, we believe customers who shop Wal-Mart today will stay with us."

-- The analyst quoted in this story does not personally own shares of Wal-Mart but Deutsche Bank does have an investment banking relationship with Wal-Mart.