May 19, 2010 in Business

Wal-Mart profit up, but feels squeeze

Associated Press
 

NEW YORK – The recovering U.S. economy may be a mixed blessing for Wal-Mart.

Wealthier customers who turned to the world’s largest retailer during the Great Recession appear to be trading back up, and stubbornly high unemployment and gas prices are still squeezing its main customers, who are having more trouble stretching their dollars to the next payday.

The squeeze hasn’t hurt its profits. Wal-Mart Stores Inc. posted a 10 percent increase in first-quarter net income Tuesday, but that was driven by cost-cutting and growth overseas.

Wal-Mart also offered a muted outlook for the second quarter. Still, its shares rose more than 2 percent, or $1.29, to $53.99 after its results beat Wall Street expectations.

U.S. Wal-Mart stores are seeing fewer customers. To win them back, Wal-Mart announced another round of price cuts on groceries Tuesday and said it’s scrambling to restock some products it eliminated over the past year as part of its campaign to declutter stores.

A key measure of revenue dropped for the fourth consecutive quarter as Wal-Mart’s namesake stores saw people shopping less or defecting to rivals such as Target or dollar stores, which have heightened their discounting pitch.

Wal-Mart’s 1.1 percent drop in revenue at stores open at least a year is in stark contrast to results from other retailers, including Home Depot, Lowe’s Corp. and T.J. Maxx’s parent, which reported rising sales as shoppers spend more on goods from riding mowers to shoes. “The economy is coming back, but (Wal-Mart is) not capturing their share,” said Craig Johnson, president of retail consultancy Customer Growth Partners.

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