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Wal-Mart posts strong profit as U.S. sales jump

Tags: Retail, Wal-Mart
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Wal-Mart Stores Inc. (WMT-N) posted a better-than-expected quarterly profit on Thursday as more people shopped its established U.S. discount stores and spent more money.

The world's largest retailer, which was recently rocked by allegations of bribery in Mexico, earned $1.09 US per share from continuing operations, compared with a profit of 98 cents a year earlier.

An earlier Easter and warmer weather contributed to the gains, the company said.

Wal-Mart had forecast earnings per share of $1.01 to $1.06. Analysts, on average, expected it to earn $1.04 per share, according to Thomson Reuters I/B/E/S.

"All in all, I think it will reassure investors who had been a little skittish in the past couple of days," said Walter Stackow, a senior research analyst at Manning & Napier.

Wal-Mart's shares jumped in early trading. The shares are still below $62.45, where they were before an April 21 New York Times report on the alleged bribery.

Sales rose 8.6 percent to $112.27 billion.

Walmart U.S. same-store sales have risen for three straight quarters following nine consecutive quarterly declines. Store traffic has risen for two straight quarters after six consecutive declines.

Wal-Mart expected Walmart U.S. same-store sales, which rose 2.6 percent, to be flat to up 2 percent. Analysts, on average, expected them to rise 1.4 percent, according to Thomson Reuters.

"The turnaround they initiated several quarters ago is starting to show some benefit, it's starting to gain traction. But at the end of the day it is still a very challenging backdrop for them," Stackow said, citing the economic concerns of Walmart's core customers as well as the competition Walmart faces from dollar stores and online retailers.

For the current second quarter, Wal-Mart expects to earn $1.13 to $1.18 per share from continuing operations. Analysts were looking for a profit of $1.16 per share.

Walmart U.S. same-store sales should rise 1 percent to 3 percent this quarter, Walmart U.S. chief executive Bill Simon said on a recorded call.

Walmart was cutting costs and pushing those savings into lowering prices on items such as food to stay ahead of competitors. While that effort drove sales growth during the quarter, it also crimped margins. The gross profit rate at Walmart U.S. was expected to continue to decline as it reduces prices this year, Simon said.

Wal-Mart has been faced with negative comments from shareholders, employees and activists after a New York Times report on April 21 that Wal-Mart de Mexico, or Walmex, allegedly orchestrated bribes of $24 million to help it grow quickly last decade and that Wal-Mart's top brass tried to cover it up.

The company said the bribery investigation was not expected to have a material impact on its business, but said it "can provide no assurance that these matters will not be material to its business in the future."

This year, total company sales were still expected to rise 5 percent to 7 percent, chief financial officer Charles Holley said.

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