Wal-Mart cuts costs to profit but says consumers wary

[MNeagle]

(Reuters) - Wal-Mart Stores Inc (WMT.N) said it would focus on curbing expenses to boost profits this year as consumer sentiment remains soft, and signaled a move away from steep price cuts that have hurt its margins.

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

But in the United States, same-store sales fell for the fifth consecutive quarter, and the company said improving those results remained a top priority.

"In the things they control, I think they do have opportunity to get (back) some lost sales -- or sales they gave up," said Edward Jones analyst Matt Arnold.

Part of that strategy involves ending a series of "rollbacks", or steep price cuts, on thousands of items that did not end up boosting sales, company executives said. Instead it restored what it calls "everyday low prices" on a wider array of goods to lure shoppers.

"Our customer continues to be under pressure and even though we had some pretty dramatic price reductions, those reductions weren't enough to drive the impact we hoped for," Wal-Mart CFO Tom Schoewe said during a conference call with reporters.

Wal-Mart shares rose 2 percent to $51.44 as investors were reassured the company was taking steps to lift sales, boosting other retail shares and the wider stock market. Home Depot (HD.N) also reported a better-than-expected profit on Tuesday, and its shares rose 4.9 percent.

Wal-Mart's base of low-income shoppers are particularly vulnerable to high U.S. unemployment and rising gasoline prices. The weak economic recovery was underscored by new data showing that permits for future home construction fell to their lowest level in more than a year.

"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.

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, compared with a 1.8 percent drop in the second quarter.

"We're confident that changes we're making will improve top line sales by the fourth quarter," Bill Simon, CEO of the U.S. Walmart division, said in a recorded message for investors.

SAVE MONEY, RAISE PROFITS

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.

Wal-Mart also raised its full-year earnings forecast to $3.95 to $4.05 a share from a previous view 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. Its Asda chain in Britain posted a fall in underlying sales for the second quarter in a row.

While sales are sluggish, Wal-Mart has cut costs throughout its supply chain and stores. But analysts question how much more it can extract costs from the system.

Wal-Mart has also faced problems 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 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.

link (http://www.reuters.com/article/idUSTRE67G1VI20100817?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FbusinessNews+%28New s+%2F+US+%2F+Business+News%29)

[Still Barbaro]

Thanks for the article, MN Eagle.

Seriously, I have not read, heard, or seen one iota of good news on the US economy in the last couple of months.

Damn.

I want to put on ear muffs, and go out to a cabin, and read some ol' classics, and tune out.

[Phoenix]

"Our customer continues to be under pressure and even though we had some pretty dramatic price reductions, those reductions weren't enough to drive the impact we hoped for," Wal-Mart CFO Tom Schoewe said during a conference call with reporters.


Were these corporate types really that clueless as to think it was just reluctance on the part of consumers to spend more?

If you don't have the money, you don't have the money. Price cuts don't "cut" it.

[Fudup]

Aaannd I still don't shop there. :P

[Stop Making Cents]

I refuse to set foot in that hellhole. God it's a 3rd world country in there!

But one of my relatives works there and he's been fulltime for the last couple years and they just recently started cutting his hours back. And he really needs the work, and he does a good job.

Walmart is just an evil corporation, that's really all you can say. I wonder if Sam Walton would approve of what it has turned into

[Joe King]

"Our customer continues to be under pressure and even though we had some pretty dramatic price reductions, those reductions weren't enough to drive the impact we hoped for," Wal-Mart CFO Tom Schoewe said during a conference call with reporters.


Were these corporate types really that clueless as to think it was just reluctance on the part of consumers to spend more?With the lower prices, they'll be spending less for the more stuff. Sounds good to me.


If you don't have the money, you don't have the money. Price cuts don't "cut" it.
Lowering the cost in that situation will only lead to even lower profits which will lead to further price reductions etc etc etc.
Then if people notice, they'll start waiting even longer to buy in hopes of even more price reductions.

Smells like deflation to me.

[Phoenix]

I refuse to set foot in that hellhole. God it's a 3rd world country in there!


So, where do you shop?

[zap]

I hate Walmart too... and haven't been in there for at least 3 years, if I have to shop it's, Smart and final, Macys, meat from the local butcher, and (Target/Costco occasionally) and they aren't much better then Walmart.

[ShortJohnSilver]

As far as plastic Chinese crap goes, once you figure out how little plastic costs, you realize that WalMart is still making it hand over fist, provided, they can keep the volume up.

Plastic is about $1 per kilogram or 50 cents per pound, at most. The manufacturing adds very little, especially if the design is simple, like a plastic tote. So when it sells for $5 they spent $1.10 on the item and then spent for shipping, advertising, labor to put it out on the floor, etc.

[Phoenix]

So just what is behind peoples' opposition to Wal-Mart?

I propose it's entirely the meme promoted by the Jewsmedia. A successful Gentile company that makes things affordable for the common person is an easy target.

Wal-Mart pays "low wages"? Compared to whom or what? Locally-owned stores? LOL Most locally-owned stores pay minimum-wage, few or no benefits, and have no opportunities for advancement. In other words, LESS than Wal-Mart offers. All the complaints about Wal-Mart, e.g., Wal-Mart employees on Medicaid, is fully true of locally-owned stores.

Wal-Mart sells only "Chinese junk"? Really? I guess you haven't honestly looked at most products everywhere. I can still buy some items that are made in America at Wal-Mart, that locally-owned stores stopped carrying due to ease of sourcing. Even hand-sanitizer and toilet paper are made in China now, sold at locally-owned stores, but I can still get USA made at Wal-Mart.


How often do we see the Jewsmedia attack divershi*ty-promoting Target? How often do we see the Jewsmedia attack Jewish-owned jewelry chains? How often does the Jewsmedia attack Jew-operation CVS? How often does the Jewsmedia lay into Jewish-owned Kohl's? How often does the Jewsmedia go after Jewish-founded, homosexual-run Gap?

[Phoenix]

As far as plastic Chinese crap goes, once you figure out how little plastic costs, you realize that WalMart is still making it hand over fist, provided, they can keep the volume up.

Plastic is about $1 per kilogram or 50 cents per pound, at most. The manufacturing adds very little, especially if the design is simple, like a plastic tote. So when it sells for $5 they spent $1.10 on the item and then spent for shipping, advertising, labor to put it out on the floor, etc.


We can buy a plastic toy that costs $2.00 to make at Wal-Mart for $9.88, or we can buy it at a locally-owned store for full retail at $24.95. We can buy a book at Wal-Mart for $7.97, or we can buy it at the locally-owned bookstore for, again, full-retail of $22.95. WHO is making the most profit?

[Twisted Titan]

As far as plastic Chinese crap goes, once you figure out how little plastic costs, you realize that WalMart is still making it hand over fist, provided, they can keep the volume up.

Plastic is about $1 per kilogram or 50 cents per pound, at most. The manufacturing adds very little, especially if the design is simple, like a plastic tote. So when it sells for $5 they spent $1.10 on the item and then spent for shipping, advertising, labor to put it out on the floor, etc.


We can buy a plastic toy that costs $2.00 to make at Wal-Mart for $9.88, or we can buy it at a locally-owned store for full retail at $24.95. We can buy a book at Wal-Mart for $7.97, or we can buy it at the locally-owned bookstore for, again, full-retail of $22.95. WHO is making the most profit?

Wal Fart is and why is that??

Because Farty doesnt have to pay the ocean of regulatory fees and compliance issues that the small mom and pop has to because they dont have enough money to grease everybody palm and the fast track inspections or the exemptions.

Of that 14 dollars of "profit" 11-12 dollars was lost in red tape.

T

[ShortJohnSilver]

Weirdest thing about Target(via Wikipedia):


In 2006, The Washington Post revealed that Target is operating two sophisticated criminal forensics laboratories, one at its headquarters and the other in Las Vegas.[92] Originally, the lab was created as an internal need for the company to investigate instances of theft and fraud and other criminal actions that have occurred on its own properties. Eventually, the company began offering pro bono services to law enforcement agencies across the country. Target's Forensic Services has assisted agencies at all levels of government, including federal agencies such as the United States Secret Service, Bureau of Alcohol, Tobacco and Firearms and the Federal Bureau of Investigation. The labs have become such a popular resource for law enforcement that Target has had to restrict its assistance to violent felonies