Wal-Mart’s quarterly profit and sales surpassed expectations yesterday as more people shopped at its established US stores and spent more, pushing its shares up more than 5 per cent, despite ongoing inquiries into possible bribery.
Wal-Mart’s shares have recovered all of the 8.2 per cent plunge suffered after an April 21st New York Times report uncovered alleged bribes paid in Mexico and an internal inquiry that was supp-ressed by Wal-Mart executives.
A strong performance from WalMart US, by far its largest unit, pleased investors. Sales at WalMart stores which have been open for at least a year rose 2.6 per cent in the first quarter, and should rise 1 per cent to 3 per cent in the second quarter, the company said.
The rebound in the US follows Wal-Mart’s reversal of its inventory reduction plan after shoppers headed elsewhere to find goods not on Wal-Mart’s shelves.
“The turnaround they initiated several quarters ago is starting to show some benefit – it’s starting to gain traction. But at the end of the day it is still a very challenging backdrop for them,” said Walter Stackow, a senior research analyst at Manning Napier, which owns Wal-Mart shares. Mr Stackow cited the economic concerns of Wal-Mart’s core customers and competition Wal-Mart faces from dollar stores and online retailers.
Economic concerns, led by joblessness, weigh on the world’s largest retailer and its shoppers. Many Wal-Mart US customers are shopping on a pay cheque cycle – spending more and buying larger packages of items early in the month, then buying less expensive items and smaller packages as cash runs low later in the month.
“We have to continue to see jobs added in the economy, I think that’s important across all sectors, especially retail,” chief financial officer Charles Holley told reporters.
Wal-Mart earned $1.09 per share from continuing operations, compared with a profit of 98 cents a year earlier. An earlier Easter and warmer weather contributed to the gains, it said. Wal-Mart had forecast earnings per share of $1.01 to $1.06. Sales rose 8.6 per cent to $112.27 billion, ahead of analysts’ forecast of $110.54 billion. The 2.6 per cent rise in same-store sales topped the company’s forecast of flat to up 2 per cent growth. – (Reuters)
