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November 13, 2008

US: Wal-Mart cuts outlook despite gains

Wal-Mart has cut its full-year earnings guidance, despite posting an improved performance in the first nine months of the year, on concerns that currency exchange will have a negative impact on its international business.

Wal-Mart has cut its full-year earnings guidance, despite posting an improved performance in the first nine months of the year, on concerns that currency exchange will have a negative impact on its international business.


“For the full year, ending 31 January, we have tightened and modestly reduced our guidance and now forecast diluted earnings per share from continuing operations to be within a range of US$3.42 to $3.46,” Tom Schoewe, Wal-Mart EVP and chief financial officer, said today (13 November).


In the nine months to 31 October, Wal-Mart saw income from continuing operations at its US Wal-Mart stores rise 9.3% to $13.36bn. US club store Sam’s Club income was marginally up, increasing 0.8% to $1.18bn in the nine-month period.


Wal-Mart’s international units witnessed the greatest gains, with income from continuing operations jumping 15.5% to $3.5bn.


The rising profits were driven by increased sales across all three segments in the nine-month period. Wal-Mart US net sales grew 7.1% to $184.28bn, Sam’s Club net sales were up 7.7% to $35bn and international sales rose 16.5% to $73.95bn.


While Wal-Mart said it expects the company’s international operations to continue to show strong growth in its fourth quarter, the retail giant warned that some of this is likely to be wiped out by the impact of currency exchange.


“The rapid changes in currency exchange rates during the last few weeks are projected to negatively affect this year’s fourth-quarter results by approximately six cents per share. In US dollar terms, strong operating performance in international may be overshadowed by these currency fluctuations,” Schoewe said.


Wal-Mart said that it anticipated its strong price positioning to pay off as economic conditions worsen and predicted a “good” holiday trading period.


“Despite economic difficulties around the world, we achieved solid sales and earnings growth and we are optimistic about the upcoming holidays. At a time when our customer is feeling the pressure of a tough economy, Wal-Mart’s price leadership is more important than ever,” Wal-Mart CEO Lee Scott said.

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