Wal-Mart Stores Inc posted its fifth-consecutive quarterly drop in US same-store sales and said it would focus on curbing expenses to help boost profits this year as consumer sentiment remains soft. The world's largest retailer posted a higher-than-expected quarterly profit and raised its full-year forecast on Tuesday, helped by cost cuts and international growth.
But analysts questioned how much longer the company could count on cost cuts to fuel profits while US sales struggled. Wal-Mart said its strategy of offering short-term steep discounts on thousands of products in its US stores failed to lift sales as much as expected. In July, it shifted back to a focus on what it calls "everyday low prices" to lure shoppers instead. "The slow economic recovery will continue to affect our customers, and we expect they will remain cautious about spending," Wal-Mart Chief Executive Mike Duke said in a statement.
The weak economic recovery was underscored by US Commerce Department data showing weaker-than-expected housing starts. Permits for future home construction fell to their lowest level in more than a year. Wal-Mart said it will take time to see improvements in US same-store sales and forecast a decline of 2 percent to an increase of 1 percent in that measure in the third quarter. Shares in Wal-Mart rose 1 percent shortly after the opening bell. Wal-Mart's profit was $3.60 billion, or 97 cents a share, in the second quarter ended July 31. Analysts on average forecast 96 cents, according to Thomson Reuters I/B/E/S.
A year earlier, it posted a profit of $3.48 billion, or 89 cents a share. Revenue rose 2.8 percent to $103.73 billion, below the average Wall Street forecast of $105.33 billion. Sales at discount stores open for a year in the company's key US market fell 1.8 percent.
Wal-Mart also raised its full-year earnings per share forecast to $3.95 to $4.05 a share from a previous forecast of $3.90 to $4. Analysts had forecast $3.99 per share. International sales rose 11 percent, helped by strength in Mexico and new store openings in Brazil and China. On a constant currency basis, sales in the unit rose 7.3 percent.