Wal-Mart and TJX report solid 1st-quarter profit gains

NEW YORK _ Solid first-quarter profits from discounters Wal-Mart and TJX show that more Americans are hunting for bargains as they struggle to cover their monthly credit card payments, put food on the table and gas in the family car.

Wal-Mart Stores Inc., the world's largest retailer, posted a 6.9 percent increase in first-quarter profits, helped by improved customer service, better inventory control and strong international sales.

The results beat Wall Street's projections by a penny, but the company issued a cautious outlook for the current quarter and warned that the economy would be a "critical factor" in 2008.

TJX Cos., which operates stores under the T.J. Maxx, Marshalls, HomeGoods names, said its first-quarter profits rose almost 20 percent, meeting analysts' projections. But lower investment income and costs from European expansion left TJX's profit margin slightly below the company's expectations.

Wal-Mart shares fell $1.37, or about 2.4 percent, to $56.65. TJX shares slipped $1.49, or about 4.6 percent, to $30.65.

The pair of earnings reports was released as The Commerce Department announced that retail sales dipped 0.2 percent last month. Commerce also said sales at department stores were down 0.1 percent, indicating that tough economic times may be pushing people to seek out bargains at giant discount stores.

Wal-Mart said that since the third quarter of last year fewer sales were being made with credit cards, suggesting to some analysts that many consumers now only have enough money to cover their monthly credit card payments, plus food, fuel and other basics. Shoppers also may be near their credit card limit; a number of banks, including Bank of America Corp. and Citigroup Inc. are reducing limits on credit cards.

Wal-Mart also said it's finding that more of its customers are unable to stretch their dollars to the next pay day.

"Business is solid at Wal-Mart, while other competitors are hurting," said Burt P. Flickinger III, managing director of consultancy Strategic Resource Group. "But it is a bad barometer for the U.S. economy, that even though Wal-Mart is king of every day low prices, shoppers still have to buy less and shift to more cash than credit."

That may not bode well for the $107 billion in tax rebate checks that are being distributed now to 130 million households.

"The stimulus checks may give you some bump, but after that filters through, where is the growth going to come from?" said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass..

Wal-Mart _ which has increased discounting to grab a larger share of the tax rebate spending _ said in a conference call that it was too early to determine the impact the checks may have on its business.

Adrianne Shapira of Goldman Sachs wrote in a report that the discounter's earnings outlook may be too conservative because it didn't factor in the benefits from the checks, however.

Wal-Mart earned $3.02 billion, or 76 cents per share, in the three months ended April 30, up from $2.83 billion, or 68 cents per share, a year earlier.

Analysts polled by Thomson Financial had projected earnings of 75 cents per share.

The company had overall revenue of $95.30 billion, up 10.3 percent from $86.41 billion in the prior year. International sales rose 22 percent.

Analysts projected revenue of $93.47 billion for the quarter.

Wal-Mart Chief Financial Officer Tom Schoewe said the company expects second-quarter sales in stores open at least a year to be up no more than 2 percent. He said the company expects to earn between 78 cents per share and 81 cents per share versus analysts' projections of 81 cents a share.

"Higher transportation costs will remain a potential headwind for us the rest of the year," Schoewe said.

Framingham, Mass.-based TJX, operator of 2,595 stores, said its net income in the three months ended April 26 rose to $193.8 million, or 43 cents per share, compared with a profit of $162.1 million, or 34 cents per share, in last year's first quarter.

A $12 million charge from a massive data breach hurt TJX's profit a year ago. A $12 million benefit due to several tax-related adjustments helped this year's first-quarter profit.

Not counting that benefit, TJX's profit in the latest period was 41 cents per share, matching the consensus estimate of analysts surveyed by Thomson Financial.

TJX's revenue rose 6 percent in the latest period to $4.36 billion, just shy of analysts' forecast of $4.39 billion. Same-store sales rose 3 percent.

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AP Writers Chuck Bartels in Little Rock, Ark. and Mark Jewell in Boston contributed to this report.