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Winnipeg Free Press - PRINT EDITION

U.S. looks to Wal-Mart as indicator of recovery

By: Staff Writer

Posted: 08/17/2012 1:00 AM | Comments: 0

NEW YORK -- Wal-Mart Stores Inc. reported a 5.7 per cent increase in second-quarter net income and raised its outlook for the full year as the world's largest retailer continues to woo back frugal shoppers by re-emphasizing it has the lowest prices on everything from clothes to electronics.

But Wal-Mart is seeing its momentum slow amid a tough economic climate in North America and abroad. Its total revenue came in short of Wall Street estimates, and the discounter is delaying store expansion plans in Mexico, its largest international division, as it deals with bribery charges there. It's also scaling back store growth plans in China and Brazil to boost profitability in those operations.

Investors, who had sent the stock up 25 per cent since mid-May, pushed shares down more than 3 per cent on the news.

Wal-Mart is considered an economic bellwether because the retailer accounts nearly 10 per cent of nonautomotive retail spending in the U.S. The company, based in Bentonville, Ark., said its customers are still being squeezed by economic problems in the U.S. and abroad. In the U.S., Wal-Mart's low-income shoppers are still having trouble stretching their dollars to the next payday, and that financial duress escalated overseas in the latest quarter. The company said what's helped is a focus on low prices.

"I don't think the economy is helping us," Charles Holley, Wal-Mart's chief financial officer told reporters. "Our customer is still very concerned about employment."

Still, Wal-Mart's results offer optimism the company's namesake U.S. business has turned a corner. Wal-Mart, which thrived during the U.S. recession as more well-off people started shopping at its stores, had begun to struggle as the retailer's core low-income customers were hit hard by joblessness and other challenges in a slow economic recovery.

Overall, Wal-Mart reported net income of $4.02 billion, or $1.19 per share, for the quarter ended July 31.

-- The Associated Press

Republished from the Winnipeg Free Press print edition August 17, 2012 B10

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