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'Difficult Times…Wal-Mart Times'

Despite a 10% boost in third-quarter earnings, Wal-Mart Inc. lowered expectations for full-year profits last week, pointing to the impact of a stronger dollar on its international results.

Wal-Mart now projects earnings per share from continuing operations for the full year to be from $3.42 to $3.46. Previously, the company expected fiscal year earnings of $3.43 to $3.50.

During a recorded call about the quarterly results, Tom Schoewe, cfo, said that foreign currency exchange will impact full-year earnings by approximately 6 cents per share.

The home department merited only a passing reference during the call, when ceo of U.S. operations Eduardo Castro-Wright noted the category's performance had improved, along with hard lines. He also said inflation is running in mid-single digits in the category, as it is in apparel.

The U.S. operation recorded a 2.7% comp increase, although traffic remained flat. Sales rose 6.1% to $61.2 billion.

Total corporate sales for the quarter ended Oct. 31 were $97.6 billion, up 7.5% from $90.8 billion in the year-ago period.

Earnings climbed to $3.14 billion, or 80 cents per share, compared to $2.86 billion, or 70 cents per share, in last year's third quarter.

Although Wal-Mart lowered expectations, Castro-Wright said he was optimistic about the fourth quarter. "These are difficult times, but these are Wal-Mart times," he said.

Wal-Mart Stores, Inc.

Qtr. 10/31 (millions) 2008 2007 % change
a. Net sales; does not include membership and other income.
b. Includes operating, selling, general and administrative expenses.
Sales $97,634a $90,826a 7.5%
Oper. Income (EBIT) 5,292 4,961 6.7
Net income 3,138 2,857 9.8
Per share (diluted) 0.80 0.70 14.3
Average gross margin 24.1% 23.8% --
SG&A expenses 19.7%b 19.4%b --
Nine months
Sales $293,248a $268,099a 9.4%
Oper. Income (EBIT) 16,421 15,076 8.9
Net income 9,608 8,635 11.3
Per share (diluted) 2.43 2.11 15.2
Average gross margin 23.8% 23.5% --
SG&A expenses 19.3%b 19.0%b --

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