Yesterday, Growth Portfolio member and the largest retailer in the world Wal-Mart (WMT) reported its second-quarter results. Earnings per share were up 9 percent – and, more important, the company increased its EPS guidance for the full year. It’s now expecting to make from $3.95 to $4.05, exceeds its earlier forecast of $4 profit for the year.

With the economy remaining weak, we view its sales growth as disappointing, although Wal-Mart continued to excel in leveraging expenses. As a result, operating income increased at a 4.4 percent rate over the like last year period, a better rate than sales. Wal-Mart customers continued to spend cautiously, and, as was commented on the company’s conference call, “the paycheck cycle remains pronounced. Government assistance continues to increase as a form of payment, particularly in regions with higher unemployment and credit now only represents about 15 percent of our tender.”

The soft U.S. economy was reflected in Wal-Mart’s flat U.S. sales. Same-store sales and same-store traffic declined—although they did show improvement by the end of the quarter. The weakness of the U.S. market was partially offset by strong trends in Wal-Mart International. Internationally, net sales increased by 11 percent and operating income grew faster than sales, reflecting growing margins.Read more...