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Wal-Mart Raises Full-Year Profit Forecast After Halting Drop in U.S. Sales

Wal-Mart Stores Inc. (WMT), the world’s largest retailer, boosted its profit forecast for the year after the Sam’s Club chain and changes in merchandising helped the company halt a decline in U.S. store sales.

Profit in the fiscal year ending in January will be $4.41 to $4.51 a share, up from a previous projection of $4.35 to $4.50, Bentonville, Arkansas-based Wal-Mart said today in a statement. The average estimate of 25 analysts in a Bloomberg survey was $4.47. Second-quarter net income climbed 5.7 percent.

Chief Executive Officer Mike Duke is restoring products and adding smaller containers to shelves to lure cash-strapped consumers from dollar stores. Wal-Mart shoppers’ biggest concern is unemployment, rather than fuel and food costs, Chief Financial Officer Charles Holley said on a conference call.

“There were definitely some signs of life at Wal-Mart,” Robert Drbul, an analyst at Barclays Capital in New York, said today in an interview. “They’re managing the business very well.”

Second-quarter sales at the company’s U.S. stores open at least a year were unchanged from a year earlier, excluding fuel, Wal-Mart said. Those sales had fallen in the eight previous quarters. Excluding fuel, sales at Sam’s Club locations open at least a year gained 5 percent, while those sales at U.S. Wal- Mart stores declined 0.9 percent.

Wal-Mart advanced $1.94, or 3.9 percent, to $51.92 at 4 p.m. in New York Stock Exchange composite trading, the second- biggest gain in the Dow Jones Industrial Average after Home Depot Inc. The shares have dropped 3.7 percent this year.

Second-Quarter Profit

Net income in the three months ended July 31 climbed to $3.8 billion, or $1.09 a share, from $3.6 billion, or 97 cents, a year earlier, Wal-Mart said. The average estimate of 21 analysts in a Bloomberg survey was $1.08 a share. Revenue rose 5.4 percent to $109.4 billion.

Wal-Mart’s international net sales increased 16 percent to $30.1 billion, while Sam’s Club’s rose 9.5 percent to $13.6 billion. Net sales in the U.S. climbed 0.4 percent to $64.9 billion. Currency exchange-rate fluctuations benefited second- quarter net sales included by $2.3 billion, Wal-Mart said.

Mexico, the U.K., Canada, Brazil and China provided the strongest net sales growth for Wal-Mart’s international operations during the quarter, Doug McMillon, Wal-Mart International president, said on a conference call.

Massmart, Netto

During the last quarter, Wal-Mart completed its purchase of a majority stake in Massmart Holdings Ltd. (MSM), the South African discount chain, and of 147 Netto discount supermarket stores in the U.K.

Wal-Mart is exploring a bid for Carrefour SA’s Brazilian stores to help bolster its scale in Latin America, several people with knowledge of the process said last week.

“Regarding new acquisitions, we remain very thoughtful in acquiring new operations,” Holley said today on a prerecorded conference call. “Our focus will continue to be investing in companies that can deliver value to our customers and shareholders.”

Wal-Mart’s customers continue to be “strained” by economic conditions, Holley told reporters on a later call. The U.S. unemployment rate was 9.1 percent in July, the fourth straight month at 9 percent or higher. Confidence among consumers in August fell to the lowest level since May 1980, according to a survey from Thomson Reuters/University of Michigan.

For the current quarter, the company forecast profit of 95 cents to $1 a share, excluding some items. The average estimate of 21 analysts was 97 cents.

“The biggest problem on Wal-Mart’s plate is their core customer and their ability to spend,” said Matt Arnold, an analyst at Edward Jones & Co. in Des Peres, Missouri. He recommends holding the shares.

To contact the reporter on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net

To contact the editor responsible for this story: Kevin Orland at korland@bloomberg.net

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