Wal-Mart profits disappoint

Wal-Mart Stores Inc., the world's largest retailer, said second-quarter profit rose less than analysts anticipated and lowered its earnings forecast, causing the stock to fall the most in more than five years.

Full-year profit will be as much as $3.13 a share, 10 cents lower than its earlier forecast, after sales of apparel and home goods faltered, the company said Tuesday.

Sales at older stores rose 1.9 percent in the second quarter and are headed for their smallest annual gain since at least 1980. Chief Executive Officer H. Lee Scott has failed to lure customers with price cuts on back-to-school and holiday items as higher gasoline and housing costs have curtailed consumer spending.

"We're not victims," Chief Financial Officer Tom Schoewe said in an interview. "While it's not the best macroeconomic environment, there's a significant retail opportunity out there, and we need to do a better job of capturing that."

Net income increased 49 percent to $3.1 billion, or 76 cents a share. Excluding one-time items, profit was 4 cents less than analysts' estimates.

A year earlier, Wal-Mart earned $2.08 billion, or 50 cents, after costs to exit Germany.

Revenue rose 8.9 percent to $93 billion for the quarter ended Aug. 3, the Bentonville, Arkansas-based company said.

"When the low-end consumer isn't shopping, it's tough even for Wal-Mart to make their numbers," said Eric Beder, an analyst at Brean Murray Carret & Co. in New York.

Higher gasoline prices, slowing home sales and rising mortgage rates have curtailed discretionary purchases. Consumer spending, which makes up about 70 percent of the economy, slowed to a 1.3 percent annual growth rate in the second quarter, the weakest since 2005.

Third-quarter sales at stores open at least a year will be from 1 percent to 3 percent, Wal-Mart said. Last year, same-store sales climbed 2.1 percent, the smallest annual gain since Wal-Mart began tracking them in 1980.

Analysts say Wal-Mart has made mistakes in recent years by trying to sell more profitable home goods and clothing and that the company needs to decide what it wants to be — especially as an retailer of apparel.