Wal-Mart eases investors fears, U.S. shoppers feel pain

Thu Feb 21, 2013 1:11pm EST
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By Brad Dorfman and Jessica Wohl

CHICAGO/BOCA RATON, Florida (Reuters) - Wal-Mart Stores Inc 18 percent dividend increase and comments that U.S. sales patterns were more normal late last week after a slow start to the year helped boost shares of the world's largest retailer 2.6 percent on Thursday.

The retailer also reported a bigger-than-expected profit increase, which was helped by a lower-than-anticipated tax rate.

Still, the company's results solidified a picture of a U.S. consumer worried about the impact of higher payroll taxes and gasoline prices, along with slow tax refunds that put some spending on hold.

Walmart U.S., Wal-Mart's largest unit by far, had a slow start to February, which Walmart U.S. Chief Executive Bill Simon attributed largely to the tax refund delay. The company expects sales at Walmart U.S. stores open at least a year, or same-store sales, to be about flat during the current first quarter. A year earlier, such sales rose 2.6 percent.

But the company has also been focusing hard on its strategy of offering low prices and the economic pressure could help it in the long run, some analysts said.

"I think Wal-Mart is quite well positioned actually," Stewart Samuel, a senior analyst with food and grocery researcher IGD, said. "If there is any sort of trading down, Wal-Mart will benefit from that."

The forecast was likely not as bad as the market feared after a Bloomberg report, citing an internal Wal-Mart memo on the weak sales that sent the stock down on Friday, Janney Capital Markets analyst David Strasser said in a note to clients.

Meanwhile, the company raised its dividend to $1.88 a share for fiscal 2014. Based on Wednesday's close, that gives the Dow Jones Industrial Average component a yield of 2.7 percent, compared with a yield of 2.6 percent for the broader index and 1.97 percent for the benchmark 10-year U.S. treasury bond.   Continued...

A view shows the Walmart logo at an opened Walmart store on Thanksgiving day in North Bergan, New Jersey November 22, 2012. REUTERS/Eric Thayer