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Updated: August 16, 2012 19:16 IST

Wal-Mart 2Q profit up 5.7 percent; outlook raised

AP
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Customer traffic increased for the third straight quarter, the company said. File Photo: AP
AP Customer traffic increased for the third straight quarter, the company said. File Photo: AP

Wal-Mart Stores Inc.’s second quarter net income rose 5.7 percent as the world’s largest retailer brings back frugal shoppers across the globe by doubling down on low prices.

The discounter also raised its full-year profit outlook on Thursday. But investors pushed the stock down after the company’s revenue came in short of expectations.

Wal-Mart also said it would delay store expansion plans in Mexico, its largest international division, as it grapples with allegations of bribery there. The delay comes four months after reports surfaced that the retailer allegedly failed to notify law enforcement after finding evidence that officials authorized millions of dollars in bribes in Mexico to speed building permits and gain other favours.

Shares were down 3 percent to $71.99 in pre-market trading.

Wal-Mart’s results are considered an economic bellwether because the company draws nearly 10 percent of non-automotive retail spending in the U.S.

Wal-Mart’s international business, which is the company’s fastest-growing division and produces more than a quarter of its revenue, has remained strong, but the company is striving to make it more profitable. Wal-Mart is slowing expansion in China in an effort to make stores more profitable.

The company’s international business increased 6.4 percent to $32.01 billion in the quarter. Even in Britain, which has been grappling with a recession, Wal-Mart has said it has seen shoppers flocking to its stores because of its low prices.

Wal-Mart’s U.S. stores, which account for 60 percent of the company’s revenue, had turned off shoppers by veering away from its “everyday low prices” strategy and getting rid of popular merchandise. But Wal-Mart last year began adding back 10,000 products and refocused on keeping prices low. As a result, revenue at Wal-Mart’s U.S. division rose 3.8 percent to $67.35 billion in the latest quarter.

The figure, which beat the 2.1 percent Wall Street estimate, marks the fourth consecutive quarterly gain for the division after nine straight quarters of declines.

Customer traffic increased for the third straight quarter, the company said.

“Given continuing economic pressures, we believe that our price leadership and value are growing in importance to customers across income levels,” Mike Duke, Wal-Mart’s president and CEO, said in a statement.

Wal-Mart reported net income of $4.02 billion, or $1.19 per share, for the quarter ended July 31. That compares with $3.80 billion, or $1.09 per share, a year ago.

Revenue excluding membership fees at Sam’s Club rose 4.5 percent to $113.53 billion. Analysts had expected earnings of $1.17 per share on revenue of $114.63 billion.

The company said it expects third-quarter net income between $1.04 per share and $1.09 per share. Analysts had expected $1.05. For the full year, the company now expects earnings per share to be in the range of $4.83 to $4.93. That is up from Wal-Mart’s original forecast of $4.72 to $4.92 per share.

The company has said it has launched its own internal investigation into the matter and is working with government officials in the U.S. and Mexico. Wal-Mart has also been overhauling its compliance program.

Still, investors, who pushed Wal-Mart’s stock down right after the allegations surfaced in late April, had sent shares up 25 percent since mid-May.

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