Wal-Mart profit ticks up, but sales slip

No. 1 retailer's earnings slightly higher from year ago, but overall sales hurt by changes in currency rates.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Parija B. Kavilanz, CNNMoney.com senior writer

How is the paycheck stimulus tax break affecting your economic situation?
  • It's helpful
  • It's not a big deal
  • I don't get the break

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. To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.