SEARS HOLDINGS CORPORATION 
By 
(Reuters) - Wal-Mart Stores Inc's (>> Wal-Mart Stores, Inc.) full-year profit may miss analysts' expectations as growth slows in its international markets, pressuring the company even as its U.S. discount stores continue to prosper.
The world's largest retailer, viewed as a barometer of economic activity, said on Thursday its cash-strapped customers tend to spend more at the beginning of the month when they get their paychecks. That "paycheck cycle" has extended its reach to the company's markets beyond the United States.
"It became more pronounced across the globe," Chief Financial Officer Charles Holley told reporters, without naming any specific markets where he sees the shift.
Wal-Mart's higher second-quarter profit narrowly beat the average estimate of analysts polled by Reuters. While the company raised its earnings outlook for the full year, that could still miss analysts' expectations.
Wal-Mart shares were down 3.4 percent at $71.91, erasing recent gains, and were the worst performer in the Dow Jones industrial average <.DJI> in afternoon trading.
In the United States, Wal-Mart's largest market, shoppers' top concerns are employment, gas prices and higher food costs, Holley said.
Other retailers, too, added to concerns about the plight of lower-income U.S. consumers.
Dollar Tree Inc (>> Dollar Tree, Inc.) forecast quarterly earnings below Wall Street estimates on Thursday.
Still, Wal-Mart plans to open more stores and expects growth across its regions, but, as it has said earlier this year, will slow down store openings in Brazil, China and Mexico.
In Brazil and China, where it has hundreds of stores, it wants to "let them catch their breath" and work on moving to everyday low pricing and improving profitability, Holley said.
At the same time, the store approval process in Mexico has slowed and become more complex in the wake of allegations the company had bribed government officials to speed up approvals.
U.S. GROWTH MODERATES
Sales at Walmart U.S. stores open at least a year, or same-store sales, grew 2.2 percent in the second quarter.
While that beat analysts' average estimate of 2.1 percent, according to Thomson Reuters I/B/E/S, it was just above the midpoint of the company's 1 percent to 3 percent forecast. The pace of growth at Wal-Mart's largest unit slowed from a 2.6 percent rise in the first quarter.
"There was not as much momentum as we thought there would be," said John Tomlinson, senior hardline retail analyst at ITG Investment Research. "People thought that the business was gaining some steam instead of taking maybe a hair of a step back."
More shoppers are visiting Walmart U.S. stores, where traffic grew 0.4 percent in the second quarter, meaning roughly 80,000 additional customers visited the chain each day.
Wal-Mart said it would bring back holiday layaway in the United States this quarter. Layaway, which allows customers to keep a product on hold at the store and pay for it over time, helped boost holiday sales last year.
Walmart U.S. has been promoting its low prices with a heavy run of commercials in 25 key markets, such as a price challenge versus Supervalu Inc's (>> SUPERVALU INC.) Jewel-Osco stores airing in Chicago.
Such messages are critical as shoppers continue to digest lackluster economic news. The number of Americans filing new claims for jobless benefits edged higher last week, and there is the looming possibility the government will raise taxes and cut spending next year.
The Walmart U.S. discount chain has now posted four consecutive quarters of same-store sales growth after nine straight quarterly declines.
Still, those gains trailed results at some smaller competitors. Target Corp (>> Target Corporation) said second-quarter same-store sales rose 3.1 percent.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic: Wal-Mart vs Target
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
ADDING LESS GLOBAL SPACE
Chief Executive Mike Duke said international growth has slowed. For example, a key measure of sales at British unit Asda rose less than in the first quarter.
Wal-Mart now plans to scale back the addition of international store space this year to 21 million to 23 million square feet, instead of the 30 million to 33 million square feet it had earlier forecast.
"International has lower levels of profitability than domestic and it does take up a lot of the capital spending budget," said Edward Jones analyst Matt Arnold. "Any slowdown in spending in international I think will be viewed, long-term, as a positive."
The company continues to face government probes into allegations of bribery at its Mexican unit.
Wal-Mart said it spent about $34 million on advisers reviewing Foreign Corrupt Practices Act matters during the second quarter. It expects to incur $35 million to $40 million in related costs in both the third and fourth quarters.
Wal-Mart earned $1.18 per share in the second quarter, up from $1.09 a year earlier. Analysts, on average, expected $1.17. Consolidated net sales rose 4.5 percent to $113.53 billion.
The company now expects to earn $4.83 to $4.93 a share this year, higher than its previous target of $4.72 to $4.92. Analysts, on average, expect a profit of $4.93 a share.
Wal-Mart forecasts a third-quarter profit of $1.04 to $1.09 per share, up from 97 cents a year earlier. Analysts' average target was $1.05. The company forecast a 1 percent to 3 percent rise in Walmart U.S. same-store sales in the third quarter.
(Additional reporting by Brad Dorfman in Chicago, Dhanya Skariachan in New York, Jason Lange in Washington and Paul Sandle in London; Editing by Jeff Benkoe, John Wallace and Bernadette Baum)
By Jessica Wohl
