Tougher times are proving to be a boon for Wal-Mart Stores, which reported a 17 percent rise in quarterly profit Thursday as shoppers headed to its stores for low prices on food, health care products and electronics, and the discount retailer raised its full-year earnings outlook.
Wal-Mart, the world's largest retailer, also forecast on Thursday profit for the current quarter that could miss Wall Street targets and said it continued to see sales volatility from week to week. Its shares rose 0.6 percent in premarket trading.
"What we see, as do many around the world, is a global economy that is difficult," Wal-Mart Chief Executive Lee Scott said in a recorded call.
"When energy and oil prices go up on top of inflation and health care and core food items, there's a great deal of pressure on the customer," he said.
Scott also noted the changing habits of consumers in a weakened economic climate, one that he described as spreading from North America to Europe to some developing countries.
"People are eating more sandwiches in Puerto Rico, and relying more on private-label products in the UK," he said.
Wal-Mart's net income rose to $3.45 billion, or 87 cents per share, in the second quarter that ended July 31, from $2.95 billion, or 72 cents per share, a year earlier.
Earnings per share from continuing operations increased to 86 cents from 75 cents.
Analysts on average had been expecting 84 cents, according to Reuters Estimates.
"They're good numbers, the 86 cents is above the expectation; the guidance of 73 to 75 (is) certainly a little bit lighter than expected," said retail analyst Dana Telsey. "I think they'll meet the upper end of that. I think part of the reason they probably did that is the same-store sales, 1 to 2 percent, (and) the impact of the stimulus package checks going away; definitely a more cautious environment. I think that's the key; gross-margin expense ratio, that'll be the element to look at next. The markdowns, especially on the apparel area, have been lower lately, and that should be a positive sign."