Wal-Mart's
shares jumped and briefly recovered all of the 8.2 percent plunge
sustained after an April 21 New York Times report uncovered an alleged
past bribery scheme in Mexico that the newspaper said Wal-Mart executives knew about.
The first-quarter results, including a 10.1 percent increase in profit, showed that Wal-Mart's
U.S. recovery was on track and efforts were progressing to cut costs
and establish everyday low pricing in markets such as China.
"The real question
is, would the stock be higher if it weren't for the investigation? It's
very hard to know," said Faye Landes, managing director at Consumer Edge
Research.
At the same time, Wal-Mart is seen as a defensive play amid weak economic data and worries about Europe.
Wal-Mart
shares could rise to $65 to $70 and perhaps in six to nine months break
out of their 13-year trading range, driven by earnings growth, said
Gilford Securities analyst Bernard Sosnick. The shares last traded above
$70 in 1999.
A strong
performance from the Walmart U.S. unit pleased investors. Sales at
Walmart U.S. stores open at least a year rose 2.6 percent in the first
quarter and should rise 1 to 3 percent in the second quarter, the
company said.
"The turnaround
they initiated several quarters ago is starting to show some benefit,
it's starting to gain traction. But at the end of the day it is still a
very challenging backdrop for them," said Walter Stackow, a senior
research analyst at Manning & Napier, which owns Wal-Mart shares.
Economic problems, including joblessness, weigh on the world's largest retailer. Many of Walmart's U.S. customers are shopping on a paycheck cycle - spending more and buying larger packages of items at the beginning of the month, then buying less-expensive items and smaller packages as money runs low later in the month.
"We have to continue to see jobs added in the economy. I think that's important across all sectors, especially retail," Chief Financial Officer Charles Holley told reporters.
Wal-Mart's
shares closed up 4.l2 percent, or $2.49, at $61.68 on the New York
Stock Exchange. Thursday's intraday high of $62.50 marked the first time
Wal-Mart shares have risen above the $62.45 level, where they closed just before last month's New York Times story.
PROFIT, SALES TOP EXPECTATIONS
Wal-Mart
earned $3.74 billion, or $1.09 per share, up from $3.40 billion or 97
cents a share a year ago. An earlier Easter and warmer weather
contributed to the gains, the company said.
Wal-Mart
had forecast earnings per share of $1.01 to $1.06. Analysts, on
average, had expected it to earn $1.04 per share, according to Thomson
Reuters I/B/E/S.
Sales rose 8.6 percent to $112.27 billion, ahead of analysts' forecast of $110.54 billion.
The 2.6 percent rise in same-store sales topped the
company's forecast of flat to 2 percent growth and analysts' average
forecast of 1.4 percent, according to Thomson Reuters.Walmart U.S. same-store sales have risen for three straight quarters following nine consecutive quarterly declines. Store traffic has risen for two straight quarters after six declines.
The U.S. unit also reported the first quarterly increase in six years in apparel sales at stores open at least a year.
For the current second quarter, Wal-Mart expects to earn $1.13 to $1.18 per share from continuing operations. Analysts have forecast a profit of $1.16 per share.
Wal-Mart has been
bombarded by negative comments from shareholders, employees and
activists after the New York Times reported that Wal-Mart de Mexico, or
Walmex, allegedly orchestrated bribes of $24 million to help it grow
quickly last decade and that Wal-Mart's top brass tried to cover it up.
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