Wal-Mart Quarterly Sales Follow Forecast

Wal-Mart Stores Inc., the nation’s largest retailer, reported a 4 percent increase in first-quarter earnings, in line with lowered forecasts, as a slowdown in consumer spending apparently affected profit growth.

Net income in the quarter ended May 4 was $1.380 billion, or 31 cents a diluted share, compared with $1.326 billion, or 30 cents a diluted share, in the same quarter a year earlier.

Wall Street analysts polled by market research firm Thomson Financial/First Call on average had expected a profit of 31 cents per share. Their estimates ranged from 31 to 32 cents.

“In a competitive market, we continued to maintain our price leadership and gain market share as demonstrated by our segment-leading 6.1 percent comp [same-store sales] in the Wal-Mart Stores division in April,” Lee Scott, president and CEO of Wal-Mart, said in a press release.

In April, Wal-Mart said its first-quarter profits would trail its forecast of 32 cents a share because cool weather in March and the slowing U.S. economy cut into sales of spring apparel and other seasonal items.

Sales in the quarter increased to $48.052 billion, up 11.8 percent from $42.985 billion a year ago. Sales at stores open at least a year, a key measure of performance, rose 3.7 percent.

In a conference call with analysts, Scott said the growth rate is “not what we are accustomed to or what we are satisfied with.”

Although Scott continually referred to the “weaker economy” or a “slowdown in consumer spending” when giving his assessment of the past quarter, his outlook was generally positive.

“Consumer spending seems to be stabilizing at current levels,” he said. “However, hopes for future improvements need to be tempered because of continued layoffs, high gasoline prices and an increase in utility costs.”

Wal-Mart, whose financial results are viewed as a barometer of the nation’s health in the consumer sector, said it expects to return to double-digit earnings growth in the second half of 2001.

The news provided some of the strongest evidence to date to support the widely held view that an economic recovery may come in the last two quarters of the year.

In the second quarter, the company expects earnings around 37 cents or 38 cents a share, in line with consensus estimates. The company also projected that comparable-store sales will rise in the 3 percent to 5 percent range, similar to the growth of the first quarter.