Wal-Mart Outlook Cautious

While quarterly results indicate Wal-Mart Stores is well positioned to benefit from current economic trends, the retailer last week provided a cautious outlook for its fiscal second quarter. While there is potential for short-term impact from the stimulus checks in the United States, it is currently difficult to quantify what impact this money could have on Wal-Mart's sales, Lee

BENTONVILLE, Ark. — While quarterly results indicate Wal-Mart Stores is well positioned to benefit from current economic trends, the retailer last week provided a cautious outlook for its fiscal second quarter.

“While there is potential for short-term impact from the stimulus checks in the United States, it is currently difficult to quantify what impact this money could have on Wal-Mart's sales,” Lee Scott, chief executive officer, said in prerecorded remarks reviewing financial results for the fiscal first quarter ending April 30.

Inflation and high fuel prices are making consumers spend more discriminatingly, added Eduardo Castro-Wright, president and CEO of Wal-Mart's U.S. stores.

“Customers are faced with the results of a tougher economy, higher gas prices, food inflation and the increase in the overall cost of living,” Castro-Wright said.

Shoppers, however, are spending for items like video games, which they can use for entertaining at home, Castro-Wright said. Wal-Mart is also using endcaps to push items like $10 meal solutions to capture shoppers who otherwise might be dining out, according to Deborah Weinswig, an analyst for Citigroup Global Markets, New York.

Entertainment, along with food and health and beauty products, showed strong results in the first quarter, during which Wal-Mart posted U.S. sales of $59.1 billion — a 6.6% sales gain — with comparable-store sales increasing 2.9%, excluding fuel. Overall company sales of $94.1 billion increased 10.2%.

Earnings of $3.02 billion improved 6.7%, from leaner inventories, lower markdowns and higher sales productivity.