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Wal-Mart Profit Rises as Shoppers Hunt for Bargains

Wal-Mart, the world's largest retailer, reported a 7 percent rise in quarterly profit on Tuesday as discounts drew U.S. shoppers looking for bargains on necessities like food and pharmacy items.

WalMart
WalMart

While Wal-Mart said the year was off to a "solid start," it indicated results for the current quarter could miss Wall Street estimates as it faces a tough economic environment, higher transportation costs and customers who are running out of money between paychecks.

"Customers are faced with results of a tougher economy, higher gas prices, food inflation and the increase in the overall cost of living," said Eduardo Castro-Wright, head of Wal-Mart's U.S. operations, on a recorded call.

"The 'paycheck cycle' is more pronounced as things get tighter for customers toward the end of the month," he added.

Wal-Mart shares, which through Monday were up 22 percent year to date, fell 3 percent in early trading.

Net income rose to $3.02 billion, or 76 cents per share, in the first quarter ended on April 30, from $2.83 billion, or 68 cents per share, a year earlier.

The results matched the analysts' average forecast, according to Reuters Estimates.

Consumers are seeking out Wal-Mart's low prices, especially for basic items like groceries, shampoo and cleaning supplies, as the U.S. economy falters and prices of food and fuel soar.

The economic downturn comes as Wal-Mart has gotten back to the basics, trumpeting its low prices and slowing its aggressive expansion plans, to improve results at its existing U.S. stores.

At the end of January, Wal-Mart slashed prices on thousands of items by up to 30 percent to win sales from cash-strapped U.S. shoppers.

In the quarter, net sales rose 10 percent to $94.12 billion.

Sales at U.S. stores open at least a year, a key retail gauge known as same-store sales, rose 2.9 percent.

Sales rose almost 7 percent to $59.07 billion from $55.44 billion at the namesake Wal-Mart stores and increased to $11.11 billion from $10.32 billion at the Sam's Club warehouse division.

International sales jumped 22 percent to $23.94 billion.

For the second-quarter, Wal-Mart forecast earnings per share of 78 cents to 81 cents.

Analysts on average are expecting 81 cents.

This year, Wal-Mart shares have substantially outperformed those of smaller rival Target, which are up almost 7 percent, and the Standard and Poor's Retail Index, which is down 1 percent.