Image: Wal-Mart
Matt Rourke  /  AP
Nicole Molavi, right, of Sewell N.J. places items on a conveyer belt as cashier Christina Picone rings her up at a Wal-Mart, in Deptford, N.J.
updated 11/12/2009 9:28:34 AM ET 2009-11-12T14:28:34

Wal-Mart Stores Inc. posted a 3.2 percent increase in third-quarter profit, helped by cost-cutting measures like slashing inventories, and raised its full-year earnings outlook.

But sales at U.S. stores open at least a year slipped, and the company predicted that they could continue to fall through the critical fourth quarter, fueling more worries about the holiday shopping season and the economy.

Wal-Mart shares fell 7 cents to $52.90 in premarket trading.

The discounter, based in Bentonville, Ark., on Thursday reported a profit of $3.24 billion, or 84 cents per share, for the period ended Oct. 31. That compares with $3.14 billion, or 80 cents per share, in the year-ago period.

Revenue rose to $99.4 billion from $98.3 billion. Analysts surveyed by Thomson Reuters expected earnings of 81 cents per share on revenue of $99.9 billion.

But the company said that sales at stores open at least a year fell 0.4 percent in the period because of continued deflation in such categories as electronics and dairy as well as a tough economy. That marked the second consecutive quarterly decline. The measurement is considered an important gauge of a retailer's health because it excludes the effects of expansion.

Excluding fuel sales, the company's namesake discount stores saw sales at U.S. stores open at least a year fall 0.5 percent, while Sam's Club saw sales rise 0.1 percent.

The company doesn't expect that to pick up much in the fourth quarter, saying it anticipates a decline of 1 percent to up 1 percent.

The weak U.S. performance was eased somewhat by growth abroad, where total sales rose 1.6 percent. Adjusted for currency fluctuations, international sales rose 12.1 percent, helped by strength in the United Kingdom, Mexico and Brazil and the acquisition of a Chilean supermarket chain.

Wal-Mart, which generated $400 billion in sales last year, is considered a key barometer of consumer spending, so economists closely monitor sales trends at the discounter that could indicate what kind of economic recovery the nation would face. Consumer spending — including such items as health care — accounts for 70 percent of U.S. economic activity.

The slippage in sales at stores open at least a year is happening even as the discounter sees more customers and takes market share away from its rivals with aggressive discounting. That means that shoppers are spending less per trip.

Wal-Mart has been one of a few bright spots in retailing this year, benefiting from shoppers focusing on necessities during the recession.

It has also been able to grab wealthier consumers trading down from higher-priced stores. But the discounter has also seen growing signs of financial strain among its core customers, noticing more pronounced swings in spending between paycheck cycles.

Company executives have said that they're cutting costs like how much inventory they carry and reinvesting those savings to lower prices for shoppers, which in turn drives sales. That increased revenue will in turn help the chain lower costs through efficiency, company officials have maintained.

Within each division, Wal-Mart's U.S. namesake stores posted a 1.2 percent sales increase to $61.81 billion in the third quarter, while Sam's Club division generated revenue of $11.55 billion, down 0.7 percent.

Wal-Mart said it expects that earnings per share in the fourth quarter to be in the range of $1.08 and $1.12 per share. Analysts expect $1.12 per share for the period.

As a result, the company is raising its guidance for the full fiscal year to $3.57 to $3.61 per share, from $3.50 to $3.60 per share. Analysts expect $3.58 per share.

Wal-Mart stopped its monthly sales report after it announced its April results. Aside from shoppers' overall pullback in spending, company officials said a big factor in the second quarter was price drops in food products like dairy.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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