Wal-Mart cuts profit outlook, Q2 sales up

NEW YORK -- The company said for the full year, earnings a share from continuing operations is now estimated to be between $3.05 and $3.13. The company's initial forecast was in the range of $3.15 to $3.23 a share.

The discounter, based in Bentonville, Ark., reported net income of $3.10 billion, or 76 cents a share, for the three months ended July 31. That compared with $2.08 billion, or 50 cents a share in the year-ago period.

Analysts polled by Thomson Financial expected 76 cents a share.

The quarter included three items that provided a net benefit of $171 million after tax, or 4 cents a share. Accruals for general liability and workers' compensation claims were reduced by $196 million after tax. The company also recognized $41 million in after-tax gains from the sale of real estate. These benefits were offset by charges of $66 million after tax for legal and other contingencies.

Wal-Mart reported revenue of $93.01 billion, up from $85.43 billion in the year-ago period. Analysts had expected $92.68 billion in the quarter.

"Our underlying operating performance this quarter is not what we expect of ourselves, and not what our shareholders expect of us," said Lee Scott, Wal-Mart president and chief executive officer. "For the remainder of this year, our management team is focused on inventory improvements, delivering quality products at low prices, and store execution at the highest standards."

Scott said customers are under a lot of economic pressure and promised that Wal-Mart would keep prices down.

Wal-Mart has been dogged by the crumbling housing market, a widening credit crunch and higher gasoline prices, which have hit lower-income consumers particularly hard. But the retailer's sales, particularly in apparel and home furnishings, have also been sluggish because of its own merchandising mistakes. Wal-Mart, which downplayed discounts last year, has in recent months stepped up price cuts. This fall, it announced cuts on 16,000 items to boost sales in the critical back-to-school season.