Strong Wal-Mart profit trumps bribery probe concerns
By Jessica Wohl
(Reuters) - Wal-Mart Stores Inc's profit and sales surpassed expectations as more people shopped at its established U.S. stores and spent more, pushing shares up more than 4 percent despite ongoing internal and government probes into possible bribery.
Wal-Mart's shares jumped and briefly recovered all of the 8.2 percent plunge sustained after an April 21 New York Times report uncovered an alleged past bribery scheme in Mexico that the newspaper said Wal-Mart executives knew about.
The first-quarter results, including a 10.1 percent increase in profit, showed that Wal-Mart's U.S. recovery was on track and efforts were progressing to cut costs and establish everyday low pricing in markets such as China.
"The real question is, would the stock be higher if it weren't for the investigation? It's very hard to know," said Faye Landes, managing director at Consumer Edge Research.
At the same time, Wal-Mart is seen as a defensive play amid weak economic data and worries about Europe.
Wal-Mart shares could rise to $65 to $70 and perhaps in six to nine months break out of their 13-year trading range, driven by earnings growth, said Gilford Securities analyst Bernard Sosnick. The shares last traded above $70 in 1999.
A strong performance from the Walmart U.S. unit pleased investors. Sales at Walmart U.S. stores open at least a year rose 2.6 percent in the first quarter and should rise 1 to 3 percent in the second quarter, the company said.
The rebound in the United States follows Walmart's reversal of its inventory reduction plan after shoppers headed elsewhere to find goods not on Walmart shelves. Continued...