Wal-Mart Q1 Profit Increases by 6.9%

Wal-Mart 1Q profit rises 6.9 pct on higher sales, beating expectations.

Wal-Mart Stores Inc., the world's largest retailer, said Tuesday its profit rose 6.9 percent in its first quarter on higher sales as lower prices helped boost its results, topping Wall Street's expectations.

Wal-Mart President and CEO Lee Scott said the company is seeing returns from a plan begun two years ago to improve the way Wal-Mart does business, including more efficient inventory management and improved customer service.

"There are still uncertainties during the rest of the year," Scott said in a recorded call for investors. "The economy is playing a critical factor in 2008." But Scott and other executives said Wal-Mart is in a good position to meet customers' needs in the down economy and later, when there is a rebound.

Shares fell 82 cents to $57.20 in premarket trading. Wal-Mart earned $3.02 billion, or 76 cents per share, in the three months ended April 30, up from $2.83 billion, or 68 cents per share, a year earlier. Analysts polled by Thomson Financial had projected earnings of 75 cents per share. The estimates typically exclude one-time items.

The company had overall revenue of $95.30 billion, up 10.3 percent from $86.41 billion in the prior year. Net sales excluding membership fees rose to $94.1 billion from $85.4 billion a year ago. Analysts projected revenue of $93.47 billion for the quarter. Without fuel, same-store sales for the first quarter were up 2.9 percent at Wal-Mart's domestic properties, rising 2.7 percent in the Wal-Mart Stores division and 3.6 percent at Sam's Clubs.

Wal-Mart Chief Financial Officer Tom Schoewe said for the second quarter the company expects sales in stores open at least a year to be between flat and up 2 percent. He said the company expects to earn between 78 cents per share and 81 cents per share.

He said the company has not yet been able to gauge how much of an impact the federal tax rebate checks will have on shoppers. "Higher transportation costs will remain a potential headwind for us the rest of the year," Schoewe said. Also, corporate expenses are up because of a program to improve information systems for finance, merchandising and human resources.

Scott noted in the call that the company now has more than 2 million employees. Eduardo Castro-Wright, CEO of Wal-Mart's U.S. division, said that credit as a form of payment has declined since the third quarter of last year. "The paycheck cycle is more pronounced as things get tighter for the customer at the end of the month," Castro-Wright said.

But he said that once customers have their basic needs covered, they are still making discretionary purchases, especially on entertainment items for the home. "Customers do shop for things they want, not just what they need," he said.