Wal-Mart profit short of forecasts

NEW YORK – Wal-Mart Stores Inc., the world's largest retailer, forecast second-quarter profit that was less than analysts estimated as the slow U.S. economy and higher taxes put pressure on consumers.

Earnings per share will be $1.22 to $1.27, the Bentonville, Ark.-based company said Thursday. Analysts projected $1.29, the average of 24 estimates compiled by Bloomberg. Sales in the fiscal first quarter ended April 30 trailed analysts' estimates while profit matched projections.

Chief Executive Mike Duke has cut prices on groceries and other necessities as the chain's lower-income shoppers deal with elevated unemployment and increased Social Security taxes. First-quarter sales at U.S. Wal-Mart stores open at least 12 months fell 1.4 percent, the first drop after six straight gains. Analysts had estimated a 0.1 percent decline.

"They're pressured by the economy, unemployment, the increase in payroll taxes, the delay in tax returns," Bernard Sosnick, an analyst at Gilford Securities based in New York, said Thursday. "All these negatives coalesced in the first quarter."

Sosnick said improvement in the economy and lower gas prices should help Wal-Mart later in the year.

Its shares fell 1.7 percent to $78.50 Thursday. Wal-Mart has gained 15 percent this year, compared with a 16 percent increase for the Standard & Poor's 500 index.

First-quarter net income increased 1.1 percent to $3.78 billion, or $1.14 a share, from $3.74 billion, or $1.09, a year earlier, Wal-Mart said. Analysts projected $1.14, the average of 24 estimates compiled by Bloomberg. First-quarter revenue rose 1 percent to $114.2 billion, trailing analysts' $116.1 billion average estimate.

Unemployment remains "high on the list of concerns" of shoppers surveyed by Wal-Mart, Chief Financial Officer Charles Holley said on a call with reporters Thursday. The U.S. unemployment rate was 7.5 percent in April.

Wal-Mart's sales slowed in January and February after shoppers' incomes were reduced by a 2-percentage-point increase in the payroll tax. They also were hurt by tax returns that were delayed because of forms that were shipped late and additional, federally mandated fraud scrutiny.

Cooler temperatures also curtailed demand for spring merchandise in North America.

"It has been much cooler than normal, which has an impact on seasonal merchandise," Brian Yarbrough, an analyst at Edward Jones & Co. in St. Louis, said Thursday in an interview.