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World's biggest retailer Wal-Mart Stores said Tuesday quarterly profits rose 8% to $2.83 billion ($0.68/share) and revenue rose 8.5% to $86.41 billion -- hitting analyst estimates exactly. Wal-Mart said Sam's Club and international operations were its strongest areas, while food and generic drug sales were large growth sections. It expects domestic comparable-store sales to rise 1-2% in the coming quarter after a 0.6% first-quarter rise. It forecasts Q2 earnings from continuing operations of $0.75-0.95; analysts had been calling for $0.79. In a research note yesterday, JPMorgan analyst Charles Grom said the company has bewildered buyers as a result of its Feb. 2006 Look Beyond the Basics initiative that focuses on high-ticket items. "We feel Wal-Mart is sending a mixed message to its customer base Wal-Mart Stores 15 05 2007 Charttoday, which is partially to blame for its weak operating results... Is Wal-Mart still committed to its upscale merchandise initiative from 2006, or is the company re-focusing on price and value? We're confused and its customer is probably too." CEO Lee Scott seems to share his apprehension: "While these are record sales and earnings, we feel there was an opportunity to have done better," he said in the company's earnings press release. Shares are up 3.6% YTD, and 2.8% over the last year.

Sources: Press release, MarketWatch, Reuters, Bloomberg
Commentary: Wal-Mart Helps Skype Reach The MassesGoldman: Wal-Mart's Success Tied to Growth/Return TradeoffWhy I'm Disappointed By Wal-Mart's Short-Lived Banking Attempt
Stocks/ETFs to watch: Wal-Mart Stores Inc. (NYSE:WMT). Competitors: Costco Wholesale Corp. (NASDAQ:COST), Target Corp. (NYSE:TGT), Dollar General Corp. (NYSE:DG). ETFs: PowerShares Consumer Services ETF (PRFS), Vanguard Consumer Staples ETF (NYSEARCA:VDC), Retail HOLDRS ETF (NYSEARCA:RTH)
Conference call transcript: Wal-Mart F4Q07 Earnings Call Transcript, Wal-Mart Stores Earnings Conference Call Transcript (later today)

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Source: Wal-Mart Earnings: "We Could Have Done Better"