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The Honolulu Advertiser
Posted on: Wednesday, August 15, 2007

Wal-Mart cuts profit outlook; stock off

By Anne D'Innocenzio
Associated Press Business Writer

NEW YORK — Wal-Mart Stores Inc. reported a 49 percent increase in second-quarter profits, but the world's largest retailer cut its profit outlook amid weak economic conditions that are crimping consumer spending globally.

Shares fell more than 5 percent, or $2.35, to $43.82 at yesterday's market close.

The Bentonville, Ark.-based discounter reported a net income of $3.10 billion, or 76 cents per share, for the three months ended July 31. That compared with $2.08 billion, or 50 cents per share in the year-ago period.

The quarter included three items that provided a net benefit of $171 million after tax, or 4 cents per share. Accruals for general liability and workers' compensation claims were reduced by $196 million after tax.

The company also recognized $41 million in after-tax gains from the sale of real estate. These benefits were offset by charges of $66 million after tax for legal and other contingencies.

Analysts polled by Thomson Financial expected 76 cents per share.

Wal-Mart reported revenue of $93.01 billion, up from $85.43 billion in the year-ago period. Analysts had expected $92.68 billion in the quarter.

"Our underlying operating performance this quarter is not what we expect of ourselves, and not what our shareholders expect of us," said Lee Scott, Wal-Mart president and chief executive officer in a statement. "For the remainder of this year, our management team is focused on inventory improvements, delivering quality products at low prices, and store execution at the highest standards."

Scott said its customers are under a lot of financial pressure and promised that Wal-Mart would keep prices down.

Wal-Mart has been dogged by the crumbling housing market, a widening credit crunch and higher gasoline and food prices, which have hit lower-income consumers particularly hard.