Wal-Mart reports first decline in quarterly income in 10 years

Wal-Mart Stores, the world's largest retailer and a bellwether for the industry, has reported its first decline in quarterly income in 10 years, blaming trouble in foreign markets for the financial slip, The New York Times reported on Wednesday.

The chain said on Tuesday that profit fell 26 percent in the fiscal second quarter after it pulled out of Germany, where it had struggled for years.

The results, a rare stumble for a company preoccupied with growth, demonstrated Wal-Mart's vulnerabilities abroad, where its low-cost all-in-one retailing formula has not translated into the kind of dominance it enjoys in the United States, according to the report.

Perhaps more worrisome for Wal-Mart in the long term was the performance of its domestic stores, by far the largest division. Domestic sales rose by a modest 6.9 percent and profit margins dropped slightly, which the company attributed to higher costs for fuel, back-to-school marketing and store renovation, said the report.

"We are, quite honestly, disappointed in the sales performance of Wal-Mart U.S.," the chief executive, H. Lee Scott Jr., said in a prerecorded conference call for investors.

The urgent question facing Wal-Mart executives is whether fuel costs will continue to nibble at its profits. "Our customers tell us they are most concerned about gas prices," said Mr. Scott, who hinted that those costs seemed to be prompting consumers to shop less frequently.

For the quarter ended on July 31, Wal-Mart said net income dropped to 2.08 billion dollars, or 50 cents a share, from 2.81 billion dollars, or 67 cents a share, a year earlier -- primarily because of its decision to withdraw from Germany, which resulted in an 863 million dollar special charge against earnings.

Overall sales, from stores in the United States and abroad, rose 11.3 percent, to 84.5 billion dollars from 75.9 billion dollars.

Source: Xinhua