Wal-Mart Stores Inc. reported a 9.3% increase in profit for its fiscal third quarter but said an important measure of U.S. sales fell as customers of the retail giant continued to watch their spending.
"Our own surveys and reports … indicate that financial uncertainty still weighs heavily on everyday Americans, including many of our core customers," Chief Executive Mike Duke said Tuesday.
The world's largest retailer posted a profit of $3.4 billion, or 95 cents a share, for the quarter ended Oct. 31. Earnings were boosted by a one-time tax benefit of $191 million, which added 5 cents a share to earnings. In the same period last year, the company reported net income of $3.1 billion, or 81 cents a share.
More worrisome for the retailer, though, was that sales at U.S. Wal-Mart stores open at least a year — known as same-store sales and considered a key performance measure because it excludes the effects of store openings and closings — dropped 1.3%.
It marks the sixth straight quarter of same-store sales declines for the company.
The retailer has benefited from the recession as frugal shoppers flock to the chain for necessities such as groceries and household items. But with the national unemployment rate stuck at 9.6%, company officials said that Wal-Mart's primary customers remained financially stressed.
"Remember, 68% of our business comes from customers with household incomes under $70,000 per year," said Bill Simon, president of Wal-Mart's U.S. business. "These customers deliver to us about 22% of their share of their wallet."
Analysts said Wal-Mart also suffered some merchandising missteps as part of an effort to clean up and de-clutter stores last year.
"They took 'action alley' out — the main aisle in stores with bins of great deals," said Matt Arnold, a retail analyst with Edward Jones. "They also removed a lot of different individual products from their assortment. But it turns out that those helped drive traffic. The move alienated customers."
In an effort to attract more of its shopper base, the company said it was changing merchandising, including restocking and expanding its array of basic grocery items.
Wal-Mart executives also said Tuesday that the retailer was reverting to everyday low-pricing strategies.
The company remains optimistic about the holidays and raised its profit outlook for the year to a range of $4.08 to $4.12 a share, up from the previous estimate of $3.95 to $4.05.
Wal-Mart shares rose 31 cents to $54.26. The stock is up 1.5% this year.