Wal-Mart reported higher-than-expected profits, with same store sales rising for the first time in seven quarters. Bobbi Rebell reports.
Going small is working for Wal-Mart, the world's biggest retailer. Small format neighborhood stores were a big part of the reason that comparable sales in the U.S. rose for the first time in seven quarters. Thomson Reuters Director of Consumer Research, Jharonne Martis: SOUNDBITE: JHARONNE MARTIS, DIRECTOR OF CONSUMER RESEARCH, THOMSON REUTERS (ENGLISH) SAYING: "What is really good and different about the neighborhood stores is that they really customize to the population of the neighborhood by offering specific merchandise that they want based on the populatoin, whether they are Latin, or Indian, and on top of that you are also having that Wal-Mart is doing a big push to make sure that the produce that they are offering these consumers is fresh, something that they have been critisized for in the past. " Wal-Mart was also able to raise prices. The company's earnings and revenues came in better than forecasts. But the retailer lowered the top end of its full year profit forecast. Despite lower gas prices - their core low-income customer still faces stagnant wages and cuts to food stamps. And traffic was down in its stores. Wal-Mart also warned it was bracing for a bruising holiday season - where it will have to match prices with online rivals - putting a spotlight on their own e-commerce business: Telsey Advisory Group's Joe Feldman: SOUNDBITE: JOE FELDMAN, SENIOR MANAGING DIRECTOR AND ASSISTANT DIRECTOR OF RESEARCH, TELSEY ADVISORY GROUP (ENGLISH) SAYING: "E-commerce was up 21%, which was great. Now the people picking on them were saying well it was supposed to be up 25% all right, I get it you can pick here or there but they are still maintaining their 25% year over year guidance for the full year in terms of growth online which would get them to around $12.5 billion in revenue online which is quite large. " As for the holiday outlook - a lot of headwinds from last year are gone for retailers in general - no government shutdown - no looming concerns about a new national healthcare plan - and what that could cost. The weather is better - and of course gas is much cheaper. SOUNDBITE: JOE FELDMAN, SENIOR MANAGING DIRECTOR AND ASSISTANT DIRECTOR OF RESEARCH, TELSEY ADVISORY GROUP (ENGLISH) SAYING: "It's really quite good for the consumer right now and so we are optimistic it will be a decent holiday season. We are projecting around a 4 percent maybe a little over 4 percent in terms of total sales growth for the holiday period. and I think a lot of the retailers are optimistic. Even Wal-Mart was optimistic about what they will see this holiday season." And increasingly, confident consumers are ready to spend more than last year.