Wal-Mart’s Profit Slips

The strategy did enable Wal-Mart to break a run of nine consecutive quarters where sales at stores open at least a year in the United States had declined. Wal-Mart said its domestic same-store sales increased by 1.3 percent, above its prior projections. That compared to a 1.3 percent decline in the same quarter a year ago.

However, profit fell 2.9 percent from a year ago to $3.3 billion, making earnings per share come in at $0.96, two cents below analyst expectations.

Excluding the effects of inflation, Wal-Mart’s domestic same-store sales would have increased by 0.6 percent in the quarter, said Jeff Davis, senior vice president and treasurer, in a call with reporters.

Executives said that while visits to Wal-Mart’s stores in the United States fell from the same quarter a year ago, people were spending more per visit. Net sales for the country increased 2.7 percent to $63.8 billion.

The improving sales do not reflect a rebounding American consumer, though. Executives said the low- and middle-income shoppers Wal-Mart goes after are still under heavy budget pressure. They said Wal-Mart was bringing in a wide assortment of merchandise and keeping prices down to try to get them to spend.

“Our core customer was still impacted by high unemployment and continued uncertainty over the economy, leading to declining consumer confidence,” said William S. Simon, president and chief executive of Wal-Mart United States, in a recorded message, and that helped define Wal-Mart’s tactics.

“Cost increases in numerous categories were not passed on to our customers in the form of increased prices,” he said. “Our customers are still feeling pressured to reduce expenses wherever they can.”

A few indications of that pressure: Mr. Simon noted that layaway, which Wal-Mart began offering in October for certain holiday items, had been more popular than the retailer expected.

“Customer feedback on the return of layaway has been overwhelmingly positive and layaway transaction volume continues to exceed plan,” he said. “It’s a great way to help families on a budget shop for Christmas.”

Also, the retailer has seen some shoppers simply stop buying in categories that had gotten too expensive, such as produce, dairy and meat.

Mr. Simon said that inflation in those categories had risen about 4 percent during the quarter, though Wal-Mart had not passed on the full amount to its shoppers.

“In areas of higher price inflation, if a customer does not have a trade-down opportunity, they might just trade out,” Mr. Davis said.

Mr. Davis said Wal-Mart continued to see shoppers spending as soon as they received their paychecks, and to decrease spending as they got farther away from the paycheck dates. That suggests the shoppers do not have a lot of savings to help them out.

“Going forward we really would not expect anything different,” Mr. Davis said.

Michael T. Duke, the chief executive of Wal-Mart, said in prepared remarks that “customers remain concerned about jobs, and only one in 10 Wal-Mart moms that we surveyed view the state of the U.S. economy as good.  They want to save money.  They’re juggling credit cards, using coupons, and skipping restaurants and vacations. There is a real sense that the economic strain is taking its toll.”

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