Sam’s Gives Wal-Mart a Boost

Wal-Mart Stores Inc. said Wednesday that its quarterly earnings rose nearly 21% as strong results from its Sam’s Clubs and foreign stores offset lackluster sales at its U.S. discount division.

The world’s biggest company by revenue said store sales gained momentum toward the end of the period and it was hopeful that recent tax rebates would help sustain the rebound. But it forecast earnings for the rest of the year that were slightly below Wall Street expectations.

Analysts said Sam’s Club was the biggest surprise, turning in a strong 12.8% jump in quarterly operating profit even as it slashed prices on hundreds of items in a price war with sector leader Costco Wholesale Corp. Costco warned last week that its quarterly profit would miss expectations, in part because of pricing pressure from Sam’s.

Wal-Mart managed to maintain profitability at Sam’s Club in part by teaming up with the larger Wal-Mart discount stores to boost their buying power with suppliers, helping Sam’s cut its wholesale costs. Higher membership fees also lifted profit.

Wal-Mart Chief Executive Lee Scott said he had not expected earnings growth at Sam’s to meet company expectations until well into the second half of the year. “I’m glad to admit that I was wrong,” he said.

Shares of Wal-Mart, which hit a near-14-month high at $58.80 on Tuesday, fell 73 cents, or 1.24%, at $58.07 on the New York Stock Exchange.

The Bentonville, Ark.-based Wal-Mart said net income rose to $2.44 billion, or 56 cents a share, in the second quarter ended July 31, from $2.02 billion, or 45 cents, a year earlier.

Excluding income from its recently sold McLane grocery distribution unit, earnings were 52 cents a share, in line with the average estimate of analysts polled by Reuters. .

Wal-Mart said it was comfortable with earnings estimates for the current fiscal year at the higher end of its previous forecast of $2 to $2.05. However, analysts on average were expecting a profit of $2.06.

Wal-Mart quarterly sales increased 11.3% to $62.6 billion, while sales at stores open at least a year -- a key retail measure -- rose 3.2%.

The international division, which has been growing rapidly with the recent purchase of a 67% stake in Japanese chain Seiyu and the opening of new stores, had the company’s strongest sales growth.

Scott said sales were below expectations at the Wal-Mart Stores division, which includes supercenters with grocery stores as well as the discount stores.

That division posted operating profit of $3.32 billion, up 9.3%, with sales up 10.2% at $42.57 billion. At Sam’s Club, operating profit rose $309 million; sales climbed 7.7% to $8.55 billion.