Wal-Mart Profit Tops Views, but Forecast Trimmed

Wal-Mart Stores reported a slightly better-than-expected 10 rise in quarterly profit Thursday as shoppers seeking relief from deteriorating global economic conditions scoured its aisles for discounts on groceries and medicine.

But the world's largest retailer forecast fiscal fourth-quarter earnings that could miss current Wall Street targets, and it lowered its full-year profit outlook, citing pressure from the stronger U.S. dollar.

"I think investors by and large will look through that to some extent to say, 'This is beyond their control,' and look at their underlying fundamentals," said Jefferies & Co analyst Dan Binder.

Wal-Mart's stronger results come as other retailers have seen their sales and profits fall as a global financial meltdown and rising unemployment prompt shoppers to severely curb spending.

"The gap between their performance and everybody else is widening as things get worse in retail," Binder said.

Wal-Mart said its low prices and plans to cut prices every week until Christmas were attracting shoppers, giving it momentum headed into the crucial year-end holiday season.

"It is our time," Chief Executive Lee Scott said on a recorded call.

Wal-Mart reported net income of $3.14 billion, or 80 cents per share, for the third quarter ended Oct. 31, up from $2.86 billion, or 70 cents per share, a year earlier.

The company said earnings from continuing operations were 77 cents per share.

It had previously forecast 73 cents to 76 cents, and analysts on average had been expecting 76 cents, according to Reuters Estimates.

The company's shares rose to $52.73 in premarket trading from Wednesday's close of $52.62 on the New York Stock Exchange.

Wal-Mart Gains

Wal-Mart's sales have outpaced competitors this year as cautious consumers adopt a thrifty attitude and try to stretch their dollars by shopping in its stores.

Net sales rose more than 7 percent to $97.6 billion.

Sales at U.S. stores open at least a year rose 3 percent overall, with increases of 2.7 percent at the company's namesake stores and 4.5 percent at the Sam's Club warehouse club division.

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Eduardo Castro-Wright, head of Wal-Mart's U.S. operations, said consumers were being more cautious when it comes to discretionary purchases of electronics.

That caution roiled U.S. consumer electronics retailers, with Circuit City filing for bankruptcy protection this week and Best Buy slashing its profit forecast, citing "seismic changes in consumer behavior."

Currency Exchange Rates a Headwind

Wal-Mart forecast fourth-quarter earnings per share of $1.03 to $1.07 from continuing operations—below analysts' expectations of $1.11—on U.S. same-store sales growth of 1 percent to 3 percent.

"The rapid changes in currency exchange rates during the last few weeks are projected to negatively affect this year's fourth-quarter results by approximately 6 cents per share," Chief Financial Officer Tom Schoewe said in a statement.

A weaker dollar boosts profits of U.S. multinational companies when their foreign revenues are converted into greenbacks.

But the dollar has risen against an index of major currencies, eliminating some of that benefit.

For the full year, Wal-Mart now expects earnings per share of $3.42 to $3.46 from continuing operations, compared with a previous view of $3.43 to $3.50.

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