Wal-Mart profit misses forecast; outlook weak

[HenryTo]

How WMT investors react to this piece of news today will be very important for near-term stock market sentiment, although we should not forget that tonight's earnings report from Dell will have a huge bearing as well!

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Wal-Mart profit misses forecast; outlook weak
Thursday May 12, 9:20 am ET
By Emily Kaiser

CHICAGO (Reuters) - Wal-Mart Stores Inc. on Thursday reported a weaker-than-expected profit and said second-quarter results would miss Wall Street forecasts as steep energy prices and cool, wet weather cut spring sales.

Shares of Wal-Mart, which said gasoline prices would continue to curb consumer spending in the current quarter, fell 4 percent in premarket trading. The world's biggest retailer said it expects trends to improve in the second half and remained optimistic about the U.S. economy.

"Our results were not up to Wal-Mart standards," Chief Executive Officer Lee Scott said on a recorded message, citing steep oil prices and unusually cool, wet weather in parts of the United States.

"We should pick up momentum into the second half of the year," he added. "The biggest unknown is the impact of gasoline prices on our customer base. If oil prices stay at the current level or hopefully go lower, we would see better sales momentum."

Scott said oil prices appeared to be stabilizing, and he saw signs of improvement in the job market and real income.

Bentonville, Arkansas-based Wal-Mart had a net profit of $2.5 billion, or 58 cents per share, in the fiscal first quarter ended April 30, compared with $2.2 billion, or 50 cents per share, in the same period a year earlier.

Excluding gains from a tax resolution and legal developments, the retailer had an operating profit of 55 cents per share, below the average analyst estimate of 56 cents per share, according to Reuters Estimates.

Wal-Mart said in April that quarterly earnings would likely be around the low end of its forecast for 56 cents to 58 cents a share, prompting many analysts to lower their estimates.

Rising costs for store labor, health care and utilities also hurt profits, Wal-Mart said.

Quarterly sales rose 9.5 percent to $70.9 billion, while sales at stores open at least a year -- a key retail measure known as same-store sales -- rose 2.9 percent, below the company's forecast for 3 percent to 5 percent growth.

Spending on discretionary items like spring fashions and patio furniture was unusually weak, the retailer said.

International sales jumped 12.4 percent to $14.1 billion, helped by a weak dollar versus the British pound, euro and Canadian dollar. Stripping out the estimated $386 million in currency benefit, international sales were up 9.4 percent.

Wal-Mart said results were particularly weak in Britain, where its Asda division reported slowing sales and increased competition. Asda had been one of Wal-Mart's strongest divisions in recent years.

At the Sam's Club warehouse division, sales rose 5.9 percent to $9.2 billion.

Wal-Mart said it expects second-quarter earnings in the range of 63 cents to 67 cents per share. Analysts, on average, expected 70 cents per share, according to Reuters Estimates.

The retailer said its full-year forecast of $2.70 to $2.74 per share was still possible, but would be "far more difficult" to reach given the weak second-quarter forecast.

Shares of Wal-Mart were down $2.00, or 4 percent, at $46.60 in premarket trade on the Inet electronic network, down from a close of $48.60 on Wednesday on the New York Stock Exchange.

[HenryTo]

Wal-Mart still doing very well in China - although it is pretty much a negligible part of their operations at this point in time:
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Wal-Mart to open new China stores in 2005
Wednesday May 18, 12:32 am ET

BEIJING (Reuters) - Wal-Mart Stores Inc. (NYSE:WMT - News) plans to open 12 to 15 new stores in China this year, the president of the U.S. retailer's international business said on Wednesday, as it tries to keep pace with competitors like Carrefour SA (Paris:CARR.PA - News).

The world's largest retailer opened its 46th store in China on Wednesday, a tiny fraction of its more than 5,000 stores worldwide.

"Our goal is to open 12 to 15 units this year," John Menzer told reporters as crowds flooded the opening of the Beijing store.

Wal-Mart bought $18 billion worth of goods from China last year. If the company were a country, it would be China's sixth-largest trading partner.

But Menzer declined to say whether a possible change to China's yuan currency, which the United States says is undervalued and gives Chinese exports an unfair advantage, would impact its business.

"I can't comment on government issues, I'm a retailer. We will continue to export from China. Pricing is only one part of the equation," he said.

Wal-Mart posted a 31 percent jump in its China sales last year to 7.6 billion yuan, with its number of stores rising 30 percent, China's Commerce Ministry has said.

By comparison, China sales of French competitor Carrefour rose nearly a fifth to 16.2 billion yuan, while its number of stores surged 51 percent to 62.

Carrefour has said it aims to open 15 hypermarkets a year in China.

Despite the expansion of the global retail giants, China's $240 billion retail market -- Asia's second-largest after Japan -- is dominated by local firms such as Wumart Stores (HKSE:8277.HK - News) and Bailian Group, also know as Brilliance.