Wal-Mart Profit Rises but Misses Forecasts

Wal-Mart Stores Inc. said Thursday that fiscal first-quarter earnings rose 13.6%, below analysts’ estimates, as high gasoline prices hurt sales. The company also warned that results in the current quarter probably would suffer.

Rival discounter Target Corp., however, beat profit estimates for the quarter.

Net income at Wal-Mart, the world’s largest retailer, increased to $2.46 billion, or 58 cents a share, in the quarter ended April 30 from $2.17 billion, or 50 cents, a year earlier.

Excluding one-time items, the company earned 55 cents a share in the latest quarter. Analysts had expected 56 cents.

Revenue climbed 9.5% to $70.9 billion. But sales at U.S. stores open at least a year rose 2.9%, less than the company’s forecast, Wal-Mart said.

Chief Executive H. Lee Scott said gasoline prices were crimping customers’ spending. The company’s lack of fashionable merchandise also hurt, analysts said.

Scott said the retailer made progress in improving general merchandise sold at premium prices by introducing items such as $55 sateen sheets.

“Wal-Mart does have a core of middle and lower-end consumers, and gasoline prices do affect them,” said David Abella, a New York-based analyst at Rochdale Investment Management. “There’s also the rural component. Some of Wal-Mart’s customers have to drive farther to the stores and therefore don’t go as often.”

Scott, in a recorded message, told investors that he anticipated “we’ll face another challenging quarter and should pick up momentum into the second half of the year.”

At Target, the No. 2 U.S. discounter, net income was $494 million, or 55 cents a share, in the quarter, up 14.4% from $432 million, or 47 cents, a year earlier.

Analysts had expected 53 cents a share.

Sales growth at Target also beat Wal-Mart’s: Target’s sales rose 13% to $11.5 billion. Same-store sales were up 6.2%.

Target outperformed Wal-Mart partly because it offers more fashionable and profitable merchandise, such as Isaac Mizrahi apparel, analysts said.

“Target is clearly out-executing Wal-Mart at this point,” said Todd Jones of Philadelphia-based PNC Advisors.

“Target has opportunities to merchandise to a somewhat higher-income consumer,” said Patrick McKeever, an analyst at SunTrust Robinson Humphrey in Atlanta. “They’re hard to beat.”

Also in the retail sector, Kohl’s Corp. said it earned $124.7 million, or 36 cents a share, in the quarter, a 21% gain. But results were 1 cent below analysts’ estimates.

Kohl’s sales rose 15% to $2.74 billion. Same-store sales were up 3.7%.

Wal-Mart shares fell 95 cents to $47.65, Target gained 60 cents to $48.80, and Kohl’s lost 28 cents to $49.36, all on the New York Stock Exchange.

In other news Thursday, 50 Democrats in Congress signed a letter asking Wal-Mart for its wage data so they can examine claims of pay and promotion discrimination against women.