Wal-Mart October U.S. same-store sales up 0.4 pct

NEW YORK (Reuters) - Wal-Mart Stores Inc on Thursday reported a lower-than-expected rise in October sales at U.S. stores open at least a year, and the world's largest retailer forecast tepid sales gains for November, the start of the critical holiday shopping season.

Wal-Mart said U.S. October same-store sales rose 0.4 percent, excluding gasoline sales. Analysts, on average, were expecting same-store sales to rise 1.1 percent, according to Reuters Estimates.

For November, Wal-Mart, which is trying to revive sales at its U.S. stores, forecast U.S. same-store sales would be flat to up 2 percent. Last year, November U.S. same-store sales fell 0.5 percent.

Its shares fell almost 2 percent to $43.10 in early afternoon New York Stock Exchange trading.

The holiday season is an important one for U.S. retailers because it can account for 25 to 40 percent of annual sales. But this year, analysts are expecting lackluster holiday sales as consumer contend with the housing meltdown, rising food and fuel costs, and a credit crunch.

Wal-Mart caters to lower-income shoppers, who tend to be most sensitive to rising energy prices. It said earlier this year that its shoppers were running out of money by the end of the month.

The retailer wasted no time this year trying to draw shoppers to its stores earlier than ever to start their holiday shopping. It began cutting prices on select popular toys on September 30 and offered Thanksgiving-weekend type discounts on November 2.

But Wal-Mart continues to face hurdles drawing shoppers to its discount stores. October sales at its Wal-Mart stores open at least a year were flat, while same-store sales were up 2.7 percent at its Sam's Club warehouse divisions.

Store traffic was negative during the month at its namesake stores, although the average purchase size increased.

Grocery sales outpaced sales of general merchandise at its Wal-Mart stores, while the toy recalls of recent months weighed on demand for toys. Sales of apparel and home goods were also soft, it said.

Net sales in the four weeks ended November 2 rose 8.4 percent to $27.92 billion.

PREPARING FOR THIRD-QUARTER EARNINGS

Wal-Mart will report third-quarter earnings results November 13. The retailer did not update its earnings forecast on Thursday, although it said markdowns as a percentage of sales were lower than planned for the quarter.

Last month, it raised its forecast for third-quarter earnings from continuing operations to 66 cents to 69 cents per share from a previous forecast of 62 cents to 65 cents, citing lower expenses.

Craig Johnson, president of retail consulting firm Customer Growth Partners, said that with its apparel and home sales still struggling he did not expect "huge profits" for the third quarter.

But he said the efforts Wal-Mart has been making to cut prices on select hot items and reemphasize its low prices could set it up for "a very nice fourth-quarter."

(Reporting by Nicole Maestri, editing by Gerald E. McCormick)