Wal-Mart profit beats targets as shares shoot higher
NEW YORK (Reuters) - Wal-Mart Stores Inc reported a higher-than-expected profit on Tuesday as it controlled expenses and cut prices to draw customers into its U.S. stores earlier than ever for holiday shopping, sending its shares to their highest one-day gain in five years.
The world's No. 1 retailer also raised its full-year earnings forecast, and its shares rose more than 6 percent on the day.
"I can't say that this is it and the company's back on the upswing," Joseph Beaulieu, a Morningstar analyst, said of the third-quarter results. "But I can say that in a very tough environment this is a company that can still pull it off,"
Wal-Mart said net income rose 8 percent to $2.86 billion, or 70 cents per share, in the fiscal third quarter ended October 31, from $2.65 billion, or 63 cents per share, a year earlier.
Excluding a tax benefit from the sale of real estate, earnings were 69 cents per share, beating analysts' average forecast by 2 cents, according to Reuters Estimates.
Wal-Mart is trying to revive sales at its U.S. stores and appeal to shoppers who are feeling the pinch of higher food and fuel costs and the downturn in the housing market. In the past several weeks it has cut prices on popular toys and 15,000 other items to try to lure consumers to its stores for holiday shopping.
The company is also keeping an close eye on expenses, reducing costs in part through programs it has already announced, like a new system that schedules hourly employees based on the number of shoppers in a store.
In a research note on Monday, Goldman Sachs analyst Adrianne Shapira said Wal-Mart's use of low prices to draw shoppers to its stores while keeping a tight control on expenses was "the right strategy for the right time as consumers tighten their belts."
SALES RISING HEADING INTO HOLIDAYS
Third-quarter sales rose almost 9 percent to $90.9 billion. Sales in the U.S. division rose 6.4 percent to $57.65 billion, while sales in the company's international operations rose almost 17 percent to $22.4 billion.
Chief Executive Lee Scott, on a recorded call, said Wal-Mart's grocery, health and wellness, and entertainment businesses were performing strongly, while the struggling home and clothing departments were showing improving trends.
But Wal-Mart continues to have a hard time attracting more shoppers to its U.S. stores.
Sales at U.S. Wal-Mart stores open at least a year -- a key retail gauge known as same-store sales -- rose 1 percent in the third quarter, compared with a 3.9 percent gain at Wal-Mart's Sam's Club warehouse division.
Eduardo Castro-Wright, head of U.S. operations, said same-store sales increased because shoppers spent more during their store visits, while customer traffic declined.
For the fourth quarter, Wal-Mart expects U.S. same-store sales to be flat to up 2 percent. Continued...
