Wal-Mart second-quarter forecast trails estimates on economy

Wal-Mart Stores Inc., the world’s largest retailer, forecast second-quarter profit that was less than analysts estimated as consumers struggle amid the slow U.S. economy and higher taxes.

Earnings per share will be $1.22 to $1.27, the Bentonville, Arkansas-based company said today in a statement. Analysts projected $1.29, the average of 24 estimates compiled by Bloomberg. Sales in the fiscal first quarter ended April 30 trailed analysts’ estimates while profit matched projections.

Chief Executive Officer Mike Duke has cut prices on groceries and other necessities as the chain’s lower-income shoppers deal with elevated unemployment and higher Social Security taxes. First-quarter sales at U.S. Wal-Mart stores open at least 12 months fell 1.4%, the first drop after six straight gains. Analysts estimated a 0.1% decline.

“They’re pressured by the economy, unemployment, the increase in payroll taxes, the delay in tax returns,” Bernard Sosnick, an analyst at Gilford Securities based in New York, said today in an interview. “All these negatives coalesced in the first quarter.”

Sosnick recommends buying the shares and said improvement in the economy and lower gas prices should help Wal-Mart later in the year.

The shares fell 2.1% to $78.19 at 9:35 a.m. in New York. Wal-Mart had gained 17% this year through yesterday, compared with a 16% increase for the Standard & Poor’s 500 Index.

Profit Gains

First-quarter net income increased 1.1% to $3.78 billion, or $1.14 a share, from $3.74 billion, or $1.09, a year earlier, Wal-Mart said. Analysts projected $1.14, the average of 24 estimates compiled by Bloomberg. First-quarter revenue rose 1% to $114.2 billion, trailing analysts’ $116.1 billion average estimate.

Duke said in the statement that the first quarter was marked by “considerable headwinds to top line sales” and that the company’s performance will improve throughout the year. Comparable-store sales for Wal-Mart U.S. will be little changed to up 2% in the second quarter, the company said.

Wal-Mart’s sales slowed in January and February after shoppers’ incomes were reduced by a 2 percentage-point increase in the payroll tax. They also were hurt by tax returns that were delayed because of forms that were shipped late and additional, federally mandated fraud scrutiny.

Jerry Murray, Wal-Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail obtained by Bloomberg News that month-to-date sales had been a “total disaster.” Murray left Wal-Mart last month. Chief Financial Officer Charles Holley said in March that those sales returned to normal by the end of February.

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