Wal-Mart profits from tight economy

Wal-Mart, the world's largest retailer, has reported a 17 percent rise in quarterly net income as US shoppers turn increasingly towards cheaper goods.   ┬á Net income in the three months to 31 July climbed to $3.45 billion, up from $2.95 billion last year. ┬á┬á Wal-Mart raised its full-year earnings outlook on the strength of these results, with shoppers faced with high energy prices, the credit crunch and fears of inflation expected to continue to seek cheaper food and consumer items.┬á┬á US prices rose by 5.6 percent in the year to July, the fastest inflation rate for more than 17 years, according to figures released Thursday. ┬á┬á But the world's largest retailer predicted slower sales growth for the current quarter at its established stores in the US, as the benefits of the federal stimulus checks dry up and customers find it more difficult to stretch their paycheck to the next payday.┬á┬á A number of large retail brands suffered a drop in sales in July, but Wal-Mart appears better-placed than many to ride out the tough times. Wal-Mart said food, health-care and electronic products are in demand at its stores. ┬á┬á "What we see, as do many around the world, is a global economy that is difficult," said Wal-Mart chief executive Lee Scott. "When energy and oil prices go up on top of inflation and health care and core food items, there's a great deal of pressure on the customer."┬á┬á Upscale department store chain Nordstrom and midlevel retailer Kohl's struggled, reporting double-digit percentage earnings declines. Nordstrom reduced its full-year profit forecast, while Kohl's upgraded its full-year outlook to reflect, like Wal-Mart, stricter inventory control that boosted profit margins.┬á┬á Wal-Mart's Chief Financial Officer Tom Schoewe attributed the better second-quarter profits to tighter inventory controls, which led to fewer markdowns on merchandise. The company also noted that it met its goal of having inventory grow at half the rate of its sales growth.  ┬á┬á┬á┬á*┬á┬á┬á┬á┬á┬á┬á┬á┬á *┬á┬á┬á┬á┬á┬á┬á┬á┬á *┬á