Wal-Mart and TJX report solid 1st-quarter profit gains

Wal-Mart Stores Inc., the world's largest retailer, posted a 6.9 percent increase in first-quarter profits, helped by improved customer service, better inventory control and strong international sales.

The results beat Wall Street's projections by a penny, but the company issued a cautious outlook for the current quarter and warned that the economy would be a "critical factor" in 2008.

TJX Cos., which operates stores under the T.J. Maxx, Marshalls, HomeGoods names, said its first-quarter profits rose almost 20 percent, meeting analysts' projections. But lower investment income and costs from European expansion left TJX's profit margin slightly below the company's expectations.

Wal-Mart shares fell $1.37, or about 2.4 percent, to $56.65. TJX shares slipped $1.49, or about 4.6 percent, to $30.65.

The pair of earnings reports was released as The Commerce Department announced that retail sales dipped 0.2 percent last month. Commerce also said sales at department stores were down 0.1 percent, indicating that tough economic times may be pushing people to seek out bargains at giant discount stores.

Wal-Mart said that since the third quarter of last year fewer sales were being made with credit cards, suggesting to some analysts that many consumers now only have enough money to cover their monthly credit card payments, plus food, fuel and other basics. Shoppers also may be near their credit card limit; a number of banks, including Bank of America Corp. and Citigroup Inc. are reducing limits on credit cards.

Wal-Mart also said it's finding that more of its customers are unable to stretch their dollars to the next pay day.

"Business is solid at Wal-Mart, while other competitors are hurting," said Burt P. Flickinger III, managing director of consultancy Strategic Resource Group. "But it is a bad barometer for the U.S. economy, that even though Wal-Mart is king of every day low prices, shoppers still have to buy less and shift to more cash than credit."

That may not bode well for the $107 billion in tax rebate checks that are being distributed now to 130 million households.