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Last Updated: Tuesday, 14 August 2007, 12:46 GMT 13:46 UK
US retailers warn of tough times
Shoppers in US Wal-Mart store
US consumers have been squeezed by rising costs
Two US retailing giants, Wal-Mart and Home Depot, have warned about a poor year ahead after their latest results.

Wal-Mart's profits hit $3.1bn (1.54bn) between May and July, from $2.08bn last year, but missed forecasts.

In contrast, Home Depot saw profits fall to $1.59bn from $1.86bn in the same period a year earlier, but beat expectations.

But both firms expect earnings to fall in the months ahead, amid fears that the US economy will continue to cool.

Rising costs

Following the results, Wal-Mart chief executive Lee Scott said earnings had been harmed by wider economic pressures.

"It is no secret that many customers are running out of money toward the end of the month," said Mr Scott.

In a bid to entice more customers, Wal-Mart has been reducing many items before the back-to-school period.

The combination of higher petrol prices and higher interest rates, that have pushed up mortgage payments, have both been factors squeezing customers, leaving them with less disposable income.

Higher costs have curbed people's appetite for home improvement, harming Home Depot and other such firms.

The company said sales from outlets open at least a year dropped by 5.2% for the quarter.

The results come as recent market turmoil has raised fears that a wider global contraction could be on the horizon.

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