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Last Updated: Tuesday, 15 August 2006, 12:08 GMT 13:08 UK
Wal-Mart unveils drop in profits
Shoppers in US Wal-Mart store
US consumers have been cutting back on spending as fuel bills rise
US retail giant Wal-Mart has unveiled its first drop in profits for a decade, blaming the cost of exiting Germany.

The firm posted profits of $2.08bn (1.1bn) after one-off items for the second quarter, compared with $2.8bn for the same period last year.

It decision to pull out of Germany led to a $863m hit, and came in the wake of its exit from South Korea.

Earnings before one-off items came in at 72 cents a share, or $3bn, against 67 cents last year.

Sales woes

Wal-Mart has been beset by problems in recent months, including facing stiff competition in its home market where sales growth has lagged behind rival discount retailers Target and Costco.

Last week, Target revealed same-store sales had risen 4.3% while profits had risen 13% to $609m in the second quarter.

By contrast overall US same store sales at Wal Mart were up just 1.7%.

Operates in 15 countries
Around 6,400 stores worldwide
4,000 stores in the US
176 million customers a week worldwide
Employs 1.8 million people worldwide
Sales of $312.4bn for the year to 31 January 2006

The rising cost of petrol - which recently hit record highs of $3.015 a gallon - has also seen consumers tighten their purse stings, hitting sales.

In response, Wal-Mart lowered the price of 500 items in recent months in an attempt to lure shoppers trying to balance their shopping bills.

"Some of the same issues affecting our customers - higher utility costs and gas prices - are impacting many corporations, including Wal-Mart," Chief Executive Lee Scott said.

The group has also turned its focus to its overseas ventures in an effort to drive sales growth, setting itself a target of bringing in one-third of its sales from foreign operations.

The company operates stores in 15 countries - including the UK's Asda supermarket chain - serving more than 176 million customers around the globe each week.

Overseas hitches

However, its attempt to break into the German market was less than successful in the face of tough competition from native retailers Aldi and Lidl.

As a result, Wal-Mart last month announced pulling out of the country and sold its 85 German stores to retailer Metro - at a possible cost of $1bn.

The news came two months after the group exited the South Korean market with the sale of its 16 supercentres in the country.

Elsewhere the company is also battling against falling margins in the face of rising wage costs in the US.

To add to its woes, Wal-Mart is also embroiled in a legal battle with luxury goods maker LVMH.

The French firm claims the world's largest retailer is selling illegal copies of its Fendi-brand products in some shops.

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