UPDATE 3-Wal-Mart sales miss, says US consumers still wary

* Q2 EPS $0.97 vs Wall St $0.96 view

* Revenue $103.73 bln vs Wall St $105.33 billion view

* U.S. same-store sales fall 1.8 pct

* Says steep price cuts did not boost sales as hoped

* Shares up 1 percent
(Adds analyst, company comments)

By Brad Dorfman

CHICAGO, Aug 17 (BestGrowthStock) – Wal-Mart Stores Inc (WMT.N: )
posted its fifth-consecutive quarterly drop in U.S. same-store
sales and said it would focus on curbing expenses to help boost
profits this year as consumer sentiment remains soft.

The world’s largest retailer posted a higher-than-expected
quarterly profit and raised its full-year forecast on Tuesday,
helped by cost cuts and international growth.

But analysts questioned how much longer the company could
count on cost cuts to fuel profits while U.S. sales struggled.

“Even though they raised guidance for the full year, how
much more operating expenses can they cut?” Wall Street
Strategies analyst Brian Sozzi said.

Wal-Mart said its strategy of offering short-term steep
discounts on thousands of products in its U.S. stores failed to
lift sales as much as expected. In July, it shifted back to a
focus on what it calls “everyday low prices” to lure shoppers
instead.

“The slow economic recovery will continue to affect our
customers, and we expect they will remain cautious about
spending,” Wal-Mart Chief Executive Mike Duke said in a
statement.

The weak economic recovery was underscored by U.S. Commerce
Department data showing weaker-than-expected housing starts.
Permits for future home construction fell to their lowest level
in more than a year. [ID:nN17118370]

Wal-Mart said it will take time to see improvements in U.S.
same-store sales and forecast a decline of 2 percent to an
increase of 1 percent in that measure in the third quarter.

Shares in Wal-Mart rose 1 percent shortly after the opening
bell.

REVENUE WEAK

Chief Financial Officer Tom Schoewe said Wal-Mart raised
its full-year profit forecast based on its strong operating
performance in the first half of the year, adding that it would
continue to curb expenses going forward.

Wal-Mart’s profit was $3.60 billion, or 97 cents a share,
in the second quarter ended July 31. Analysts on average
forecast 96 cents, according to Thomson Reuters I/B/E/S.

A year earlier, it posted a profit of $3.48 billion, or 89
cents a share.

Revenue rose 2.8 percent to $103.73 billion, below the
average Wall Street forecast of $105.33 billion.

Sales at discount stores open for a year in the company’s
key U.S. market fell 1.8 percent.

Wal-Mart also raised its full-year earnings per share
forecast to $3.95 to $4.05 a share from a previous forecast of
$3.90 to $4. Analysts had forecast $3.99 per share.

International sales rose 11 percent, helped by strength in
Mexico and new store openings in Brazil and China. On a
constant currency basis, sales in the unit rose 7.3 percent.

TRADING DOWN, OR UP

Wal-Mart’s customers tend to be particularly susceptible to
a weak economy and high gas prices. Some have moved to
lower-priced dollar stores as unemployment remains high, while
others have traded up for more fashionable merchandise at
rivals like Target Corp (TGT.N: ).

But some of Wal-Mart’s problems were of its own making,
including an ill-fated move to remove hundreds of items from
stores in the “Project Impact” overhaul announced in 2008.

In June, Wal-Mart named Bill Simon as CEO of U.S. discount
stores, replacing Eduardo Castro-Wright, who remained vice
chairman of the company. Days later, the company announced the
departure of the unit’s chief merchandising officer.

Wal-Mart has also gone back to focusing on basics like
T-shirts and socks in its apparel business, an area which has
long been a drag on sales. Simon expects to see same-store
sales improve in apparel in the fourth quarter.

Wal-Mart shares were up 50 cents at $50.91 on the New York
Stock Exchange

UPDATE 3-Wal-Mart sales miss, says US consumers still wary