Watch for falling prices profit growth

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Wal-Mart has aggregated the best excuses for slowing profit growth from around the Street and is expected to present them in an earnings statement tomorrow at a fabulous discount price. Taking a cue from pure retail and bemoaning the unseasonably cold April, and a cue from manufacturing, airline and nearly every other industry in shifting the earnings conversation to rising gas prices, Wal-Mart is boldly foregoing the simple, “we just couldn’t grow that fast anymore” line for another conference call. From Bloomberg:

A 7.3 percent sales increase would be the smallest since the three months that ended January 2003. Wal-Mart on May 10 reported a 3.5 percent decline in April sales at its older stores, its worst monthly performance in at least 28 years. The retailer's profit growth would be the slowest since the second quarter of 2006, when the company posted a 26 percent drop after exiting Germany. Sales at 53 U.S. retail chains fell a combined 2.4 percent in April, the International Council of Shopping Centers said last week. That was the biggest drop since the New York-based trade group started keeping records in 1970. The retailer will find meeting its first-quarter profit forecast of 68 cents to 71 cents a share ``a challenge'' because of the ``tough sales environment'' in April, Chief Financial Officer Tom Schoewe said in a statement on April 12.

Another problem for Wal-Mart is poor people (first they want health insurance, now they won’t shop at our store!), or at least the relative lower income demographic ($40k/year on average, opposed to the millionaires that shop at Target) that tends to curb spending more in the face of rising gas prices (or at least you can pay an economist to draw a few graphs trying to explain as much). Wal-Mart is still experiencing robust growth abroad, with sales of UK and Mexico branches expected to grow close to 19% from last year. One-third of the chain’s sales and profit growth now comes from international locations.
Wal-Mart Profit Growth Probably Slowed on Weather, Gasoline [Bloomberg]

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