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 its U.S. namesake 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 rose 67 cents to $53.64 in morning 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 sales weakness 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 promised investors during a pre-recorded conference call that it plans to widen the price gap between itself and rivals.
Wal-Mart has 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.
"Our customers continue to tell us they are concerned about their own finances and employment," said Eduardo Castro-Wright, vice chairman of Wal-Mart Stores Inc., who heads up the U.S. Walmart business. That has meant that shoppers continue to focus on necessities and cut back on nonessentials.
Castro-Wright told investors in a pre-recorded conference that grocery sales were up in the low single digits, depressed by deflation in produce, meat and dairy. Sales of home decor, furniture and luggage were weaker than a year ago.
The company's apparel business saw smaller sales declines, but the best-performing areas were necessities like sleepwear, socks and underwear. Sales of more discretionary items like women's, shoes and jewelry were weak.
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.