Traverse City Record-Eagle

Business

August 17, 2012

Wal-Mart 2Q profit up 5.7%

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NEW YORK (AP) — Wal-Mart Stores Inc. reported a 5.7 percent 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 down amid a tough economic climate here 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 percent since mid-May, pushed shares down more than 3 percent on the news.

Wal-Mart is considered an economic bellwether because the retailer accounts nearly 10 percent 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 it 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 during a conference call. "Our customer is still very concerned about employment."

Still, Wal-Mart's results offer optimism that 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 here, 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.

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