* Q1 EPS $1.09 vs Wall Street view of $1.04
* Walmart U.S. same-store sales up 2.6 pct
* International bribery probe ongoing
* Shares close up more than 4 percent
(Updates stock price)
By Jessica Wohl
May 17 (Reuters) – Wal-Mart Stores Inc’s profit and
sales surpassed expectations as more people shopped at its
established U.S. stores and spent more, pushing shares up mo re
than 4 percent des pite ongoing internal and government probes
into possible bribery.
Wal-Mart’s shares jumped and briefly recovered all of the
8.2 percent plunge sustained after an April 21 New York Times
report uncovered an alleged past bribery scheme in Mexico that
the newspaper said Wal-Mart executives knew about.
The first-quarter results, including a 10.1 percent increase
in profit, showed that Wal-Mart’s U.S. recovery was on track and
efforts were progressing to cut costs and establish everyday low
pricing in markets such as China.
“The real question is, would the stock be higher if it
weren’t for the investigation? It’s very hard to know,” said
Faye Landes, managing director at Consumer Edge Research.
At the same time, Wal-Mart is seen as a defensive play amid
weak economic data and worries about Europe.
Wal-Mart shares could rise to $65 to $70 and perhaps in six
to nine months break out of their 13-year trading range, driven
by earnings growth, said Gilford Securities analyst Bernard
Sosnick. The shares last traded above $70 in 1999.
A strong performance from the Walmart U.S. unit pleased
investors. Sales at Walmart U.S. stores open at least a year
rose 2.6 percent in the first quarter and should rise 1 to 3
percent in the second quarter, the company said.
The rebound in the United States follows Walmart’s reversal
of its inventory reduction plan after shoppers headed elsewhere
to find goods not on Walmart shelves.
“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,” said Walter Stackow, a senior research
analyst at Manning & Napier, which owns Wal-Mart shares.
Stackow cited the financial concerns of Walmart’s core
customers and the competition Walmart faces from dollar stores
and online retailers.
Economic problems, including joblessness, weigh on the
world’s largest retailer. Many of Walmart’s U.S. customers are
shopping on a paycheck cycle – spending more and buying larger
packages of items at the beginning of the month, then buying
less-expensive items and smaller packages as money runs low
later in the month.
“We have to continue to see jobs added in the economy. I
think that’s important across all sectors, especially retail,”
Chief Financial Officer Charles Holley told reporters.
Wal-Mart’s shares closed up 4.l2 percent, or $2.49, at
$61.68 on the New York Stock Exchange. Thursday’s intraday high
of $62.50 marked the first time Wal-Mart shares have risen above
the $62.45 level, where they closed just before last month’s New
York Times story.
PROFIT, SALES TOP EXPECTATIONS
Wal-Mart earned $3.74 billion, or $1.09 per share, up from
$3.40 billion or 97 cents a share a year ago. 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, had expected it to earn $1.04 per share,
according to Thomson Reuters I/B/E/S.
Sales rose 8.6 percent to $112.27 billion, ahead of
analysts’ forecast of $110.54 billion.
The 2.6 percent rise in same-store sales topped the
company’s forecast of flat to 2 percent growth and analysts’
average forecast of 1.4 percent, according to Thomson Reuters.
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 declines.
The U.S. unit also reported the first quarterly increase in
six years in apparel sales at stores open at least a year.
For the current second quarter, Wal-Mart expects to earn
$1.13 to $1.18 per share from continuing operations. Analysts
have forecast a profit of $1.16 per share.
BRIBERY INVESTIGATIONS PROCEED
Wal-Mart has been bombarded by negative comments from
shareholders, employees and activists after the New York Times
reported 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.
Wal-Mart said on Thursday that a number of government
agencies in Mexico and the U.S. Department of Justice and the
U.S. Securities and Exchange Commission were investigating.
The company contends the matter should not have a material
impact on its business, but cannot say for certain that it will
not. Along with incurring costs related to the probes, lawsuits
and its own review, the process may impinge on the time some
executives have to devote to other matters.
On Thursday, proxy advisory firm Egan Jones said Wal-Mart
shareholders should withhold their votes for Chief Executive
Mike Duke and former CEO Lee Scott and vote for a proposal
brought by shareholders requesting regular reports on the
company’s political spending.
Also on Thursday, two U.S. lawmakers asked for Wal-Mart to
allow a former company lawyer to cooperate in their probe.
Walmex sales rose 13 percent and its same-store sales in
Mexico rose 5.6 percent. Operating income at the unit was flat.
It opened 45 stores in Mexico during the quarter.
Holley declined to comment on Wal-Mart’s prior fiscal-year
forecast, which calls for earnings of $4.72 to $4.92 per share.
The company is expected to update that forecast when it issues
second-quarter results. Sales are still expected to rise 5 to 7
percent, he said.
(Reporting by Jessica Wohl and Brad Dorfman in Chicago,
additional reporting by Tom Hals in Wilmington, Del., and Aruna
Viswanatha in Washington; Editing by Maureen Bavdek and Matthew
Lewis)
