Wal-Mart second-quarter profit rises 3.6 percent on cost-cutting

NEW YORK — Wal-Mart Stores Inc. reported a 3.6 percent increase in second-quarter net income and raised its earnings guidance for the full year as it benefits from cost-cutting and robust global growth in China, Brazil and Mexico.

But a closely watched measure of revenue fell for the fifth consecutive quarter, dragged down by its U.S. Walmart division, as its main customers have felt the biggest impact of the economy's woes.

Nevertheless, an upbeat profit picture lifted Wal-Mart shares by almost 2 percent, or 86 cents, to $51.27.

The discounter said Tuesday it had net income of $3.59 billion, or 97 cents per share, for the period ended July 31. That compares with $3.47 billion, or 89 cents per share, a year ago.

Revenue rose almost 3 percent to $103.7 billion. Revenue at stores open at least a year fell 1.4 percent, worse than the 0.26 percent expected by Thomson Reuters. At Wal-Mart's namesake stores, that measure fell 1.8 percent while at Sam's Clubs, the measure was up 1 percent.

The measure is a key indicator of a retailer's health.

Shares rose 39 cents to $50.80 in premarket trading.

Analysts had expected earnings per share of 96 cents on revenue of $105.3 billion.

"We continue to focus on our priorities of growth, leverage and return," said Mike Duke, Wal-Mart Stores Inc.'s president and CEO, said in a statement. "The slow economic recovery will continue to affect our customers, and we expect they will remain cautious about spending."

As a testament to customers' tepid spending, shoppers are buying back-to-school items closer to the school year's start, officials said during a prerecorded conference call.

Customers continue to have a hard time stretching their dollars to the next payday, and food-stamp use continues to rise, particularly in areas with the highest unemployment, the company said.

During a conference call with journalists Tuesday, Tom Schoewe, chief financial officer, said that even the steep discounts on thousands of products — $1 ketchup bottles and sub-$4 cases of Coke — failed to lift sales as much as forecast because people remain frugal. In July, the discounter went back emphasizing "everyday low prices," rather than such loss leaders designed to get people in the store in hopes they'll buy other, profitable items.

Company officials said that credit card transactions now account for only 15 percent of spending at Wal-Mart. Wal-Mart couldn't immediately offer a figure on what it was in the past.