Shopping carts are photographed outside the Wal-Mart store in Mayfield Hts., Ohio on Monday, Nov. 14, 2011. Wal-Mart is reporting that the third-quarter profits slipped 2.9 percent and offered a conservative fourth-quarter outlook. But the world's largest retailer announced its first quarterly gain in its U.S. namesake business, reversing a more than two year sales slump. (AP Photo/Amy Sancetta)
Shopping carts are photographed outside the Wal-Mart store in Mayfield Hts., Ohio on Monday, Nov. 14, 2011. Wal-Mart is reporting that the third-quarter profits slipped 2.9 percent and offered a conservative fourth-quarter outlook. But the world's largest retailer announced its first quarterly gain in its U.S. namesake business, reversing a more than two year sales slump. (AP Photo/Amy Sancetta)
This photo taken Nov. 14, 2011, shows the rain-soaked handle of a shopping cart outside the Wal-Mart store in Mayfield Hts. Wal-Mart is reporting that the third-quarter profits slipped 2.9 percent and offered a conservative fourth-quarter outlook. But the world's largest retailer announced its first quarterly gain in its U.S. namesake business, reversing a more than two year sales slump. (AP Photo/Amy Sancetta)
NEW YORK (AP) ? Wal-Mart Stores Inc.'s reported its first quarterly revenue gain in its U.S. namesake business in more than two years, but the discounter's third-quarter profit slipped 2.9 percent, missing Wall Street expectations.
That Wal-Mart, the world's largest retailer, has reversed nine consecutive quarters of revenue declines in its branded stores in the U.S. is a positive sign in the midst of otherwise bad economic news. Wal-Mart is a bellwether in the U.S., and its core low-income shoppers have been particularly hard hit by joblessness and the other challenges of the nation's weak economy. The results indicate that Wal-Mart's latest strategy to focus on low prices and restock popular merchandise can get those most hurt by the downturn to spend.
"The plan is working," said Mike Duke, CEO of Wal-Mart, in a pre-recorded call released Tuesday. "Customers are responding favorably."
Wal-Mart said Tuesday it earned 97 cents per share, or $3.33 billion in the three-month period ended Oct. 31. That compares with 95 cents per share, or $3.43 billion, in the year-ago period. The year-ago results included a tax benefit of a nickel. Net revenue rose 8.2 percent to $109.5 billion.
Analysts had expected 98 cents per share on revenue of $108.86 billion, according to Factset.
Wal-Mart's U.S. namesake division's revenue at stores opened at least a year ? an indicator of a retailer's health ? rose 1.3 percent. That beat Wall Street estimates for a 0.3 percent increase and reverses nine straight quarters of declines in the measure.
Overall, revenue at stores in its U.S. business opened at least a year rose 1.9 percent, including a 5.7 percent increase at Sam's Club stores. Analysts had expected a 4.9 percent gain at the Sam's Club division. Wal-Mart said that the gains in revenue at stores opened at least a year were fueled by an increase in the average ticket, though traffic was still down. Sales of food and health and wellness products, sporting goods, crafts and clothing were strong.
Wal-Mart has been working to rebound sales at stores open at least a year at its U.S. business, which have been hurt by the economic downturn and missteps the retailer made in its pricing and selection. The business is particularly important to Wal-Mart because it accounts for 62 percent of its total revenue. The latest results show Wal-Mart's strategy may be working.
The company, based on Bentonville, Ark., has been restoring thousands of popular products it ditched during an overzealous bid to de-clutter its stores. Wal-Mart, which late last year started offering low prices only on select items, also has been working to reclaim its reputation as the lowest-price leader by going back to the "everyday" low pricing strategy that was made popular by its founder, Sam Walton.
Although Wal-Mart's strategy seems to be working, it comes with a cost. The company said that all three areas, including its Wal-Mart U.S. division, Sam's Club and its international division, saw a decline in profit margins from the impact of its low price focus and inflationary pressures.
Going forward, Wal-Mart executives hope that the company's campaign to turnaround its business will continue improve results. But they are cautiously optimistic because Wal-Mart's core low-income customers are still reeling from the economic downturn.
Wal-Mart said it expects fourth-quarter earnings results to be in the range of $1.42 per share to $1.48 per share in the fourth quarter. Analysts had expected $1.45 per share. For the full year, it expects a range of $4.45 per share to $4.51 per share. Analysts had expected $4.50 per share, according to Factset.
"Customers remain concerned about jobs," said Duke, who added that only one in 10 mothers surveyed by Wal-Mart view the U.S. economy as "good."
Like most retailers, Wal-Mart is counting on the upcoming holiday shopping season to help get cost-conscious shoppers spending.
Ahead of the season, Wal-Mart is pounding its low price message hard by guaranteeing customers will get the lowest price no matter when they buy during the season. With its new Christmas Price Guarantee program, shoppers who buy something at its store between Nov. 1 and Dec. 25, but then find the identical product elsewhere for less, can get a gift card in the amount of the difference.
The company also brought back layaway this holiday season and said Tuesday the response has been "overwhelmingly positive". It is also starting its Black Friday specials at 10 p.m. on Thanksgiving, two hours earlier than many of its competitors like Kohl's Corp., Target Corp. and Macy's.
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