Walmart's Profits Jump 5.7% in Q2 as Frugal Customers Return

Walmart Store

NEW YORK -- Walmart's second-quarter net income rose 5.7 percent as the world's largest retailer wooed back frugal shoppers by doubling down on low prices.

The discounter also is raising its full-year profit outlook.

But quarterly revenue that came in short of expectations disappointed investors, who sent the company's stock down 3 percent to $71.99 in premarket trading.

Walmart's (WMT) results are considered a bellwether of consumer spending because the company draws nearly 10 percent of nonautomotive retail spending in the U.S. The latest report card from the discounter shows that low-income shoppers are willing to buy -- if it's at rock-bottom prices.

Walmart has had to work hard to get shoppers back. The business had been struggling as its core low-income customers were hard hit by joblessness and other challenges in the down economy. Adding to that, Walmart's U.S. stores, which account for 60 percent of the company's revenue, had made some mistakes by veering away from its "everyday low prices" strategy and getting rid of popular merchandise.

But Walmart last year began adding back 10,000 products and refocused on keeping prices low throughout the store. As a result, revenue at Walmart's U.S. division rose 3.8 percent to $67.35 billion.

Revenue at stores open at least a year -- considered a key measure of a retailer's health because it excludes the impact from stores that open and close during the year -- rose 2.2 percent in the division, excluding fuel. 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.

For the overall U.S. business, revenue at stores opened at least a year rose 2.5 percent, including a 4.7 percent increase at the company Sam's Club warehouses.

"Given continuing economic pressures, we believe that our price leadership and value are growing in importance to customers across income levels," Mike Duke, Walmart's president and CEO, said in a statement.

Walmart's international business, which produces more than a quarter of its revenue, has remained strong, but the company is striving to make it more profitable. Walmart is focusing on improving its business in Brazil and China. The company's international business increased 6.4 percent to $32.01 billion in the quarter.

The company 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 compares with its original forecast of $4.72 to $4.92 per share. Analysts had expected $4.93.

The company continues to deal with allegations of bribery in its Mexico operations, which surfaced in late April and could threaten momentum in its international business, Walmart's fastest-growing division. The company has launched its own internal investigation into the matter and is working with government officials in the U.S. and Mexico. At the company's annual meeting in June, company officials pledged that they will get to the bottom of the allegations. Walmart has also been overhauling its compliance program.

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

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Walmart within 1/2/mile of my house and I wouldn't go if they were giving item's away. I switched from Sams to Costco also. Reason worst customer service ever.

August 16 2012 at 4:06 PM Report abuse rate up rate down Reply
1 reply to sandymac36's comment

Great place to buy my ammunition .. so I don't have to worry about dealing with the gun nanny's!!

August 16 2012 at 5:49 PM Report abuse rate up rate down Reply

Wal Mart is no good. they fire a person because he didn't take his lunch break when he was suppose to. This happened 3 times and now he has NO JOB!!!!!!! What is he suppose to do just leave the person he is helping out and say oh your on your own now I have to take my lunch break or i'll get in trouble. Ans if you've ever been in Wal Mart you know you can NEVER find anyone to help you. Now you even have to check out you own stuff. And half the time it doesn't work right, so you have to stand there like a dummy and wait for someone to come and help you. Good luck on that !!!!! half the time you go in there for something and if you do find where it's suppose to be it's empty!!!!!!! WHY because they don't have enough help. They are FIRE happy. My daughters boyfriend worked there for 4 years and was helping someone and took his lunch break after he was done with helping these people and after 3 times they fired him!!!!!! two females that was his boss in this dept. was really mean & rude to him. And he can't get unimployment because if your fired because of a company rules you don't get it. This is so stupid!!!!!!!!!! He was supporting my daughter & there 2 daughters and now he can't get anything..... This world is going to hell and Wal Mart sure isn't helping.

August 16 2012 at 2:38 PM Report abuse rate up rate down Reply

Huge companies are increasing there profit while selling at a lower price...finally!

this is the reason our economy went into a downfall....big companies do well and increase prices but personal incomes do not increase. at a certain point people can not afford to buy. its nice to see these giant companies that will make a profit no matter what can feel some humanity and adapt to the consumers. payable prices while still making a profit. what more does a company need to continue to grow... when people realize greed strangles the economy and change... this country can be enormously successful!

August 16 2012 at 2:38 PM Report abuse rate up rate down Reply

There is a lot of merchandise Walmart quit carrying plus every week they change the merchandise around and you have to hunt it. Walmart is about our only choice except Fred's and Dollar General. We have to go out of town but I'm willing to do that to shop at stores we don't have and many of them are better anyway. It is so aggravating to shop at Walmart.. I compare prices and that is where I shop - wherever it saves me money.

August 16 2012 at 1:51 PM Report abuse rate up rate down Reply

Well if someone at Sam's is reading...your strategy like Wal-marts to cut the lines of merchandise carried has back-fired at your stores too! Your numbers are down too in some areas. I've been a member for 22 years and I have seen nothing but cut backs at the one store in our area (Holland, OH) excepting that you increased the store size; added specialty items while cutting back on staple goods. We now have a Costco and I hear that it is doing well.

Cut the number of models of TVs and increase other areas of electronics for one. The only truly good thing overall of late is the gas station on the premises. A close second might be frozen and refrigerated foods/baked goods.

August 16 2012 at 12:48 PM Report abuse rate up rate down Reply