Wal-Mart (WMT) posted a solid Q1, but the Q2 outlook was weak. US consumers–the most important driver of US economic growth–continue to struggle.
“There are still uncertainties about the rest of the year,” Chief Executive H. Lee Scott said. “The economy is playing a critical factor in 2008. Customers are focusing on food and daily-use items. Small businesses are under pressure.”
Wal-Mart forecasted Q2 profits may be between $0.78-$0.81, versus current Street consensus of $0.81. The 3 cent range was given because it is “difficult to quantify” the effect the tax rebate checks will have on consumer spending. (We think the rebate impact will be minor). Same-store sales are, at most, expected to rise 2%.
Wal-Mart is doing better than other retailers, as consumers increasingly seek the lowest priced goods, but it is obviously too large to entirely dodge the impact of a weakening economy.
Wal-Mart reported Q1 net income up 6.9% to $3.02 billion (76 cents a share), a penny above consensus.