Walmart Makes More Money on Lower Prices

Wal-Mart Stores Inc. (NYSE:WMT) reported better-than-expected quarterly profit on Thursday as sales rose 2.6 percent at its U.S. Walmart stores open at least a year.

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Wal-Mart earned $1.09 per share from continuing operations during the quarter, compared with a profit of 98 cents in the year-ago period. Wal-Mart had forecast earnings per share of $1.01 to $1.07, while the average analyst estimate had been $1.04 per share, according to Thomson Reuters I/B/E/S.

Same-store sales rose for the third straight quarter as the retailer continued to recover from nine consecutive quarterly declines. Wal-Mart had expected Walmart U.S. same-store sales to be flat to 2 percent. Analysts expected them to rise 1.4 percent.

Wal-Mart projected earnings per share from continuing operations in the range of $1.13 to $1.18 for the current quarter. Analysts were looking for a profit of $1.16 per share.

Same-store sales are expected to rise 1 percent to 3 percent in the U.S., according to Walmart U.S. CEO Bill Simon, helped in part by the company’s cost-cutting strategies, which have allowed it to pass on those savings in the form of lower prices, undercutting competitors and drawing in customers.

However, lower prices also resulted in lower margins in the quarter. The gross profit rate at Walmart U.S. is expected to continue to decline as it continues to reduce prices, Simon said.

Total sales are still expected to rise 5 percent to 7 percent this year, Wal-Mart CEO Charles Holley said.

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