Wal-Mart profit rises, but holiday view light

By Nicole Maestri

SAN FRANCISCO (Reuters) - Wal-Mart Stores Inc posted a higher-than-expected quarterly profit on Thursday, but forecast earnings during the key holiday quarter that could miss Wall Street estimates as its customers face rising unemployment.

Wal-Mart, whose shares rose 1 percent, is defending its title as the low-price leader ahead of the holidays, a strategy that could also weigh on results. It has repeatedly sparred with rivals from Amazon.com to Target Corp in slashing prices for items ranging from toys to books.

Executives at the world's largest retailer said on Thursday that its shoppers were still worried about the U.S. economy, including double-digit unemployment levels, despite signs the country was returning to growth.

"Customers continue to tell us they're concerned about their own finances and unemployment," Wal-Mart U.S. chief Eduardo Castro-Wright said on a prerecorded call. "We recognize that some customers may be more cautious in their holiday spending."

A report by the U.S. government on Thursday showed the number of U.S. workers filing new claims for jobless insurance fell to the lowest since January, pointing to improvements in the labor market.

Wal-Mart Treasurer Charles Holley told reporters that consumers would need to see a sustainable drop in the unemployment rate before they would feel more optimistic.

For the fourth quarter, which ends January 31 and includes the holiday shopping rush, Wal-Mart forecast earnings per share of $1.08 to $1.12 from continuing operations. Analysts on average expected $1.12 a share, according to Thomson Reuters I/B/E/S.

It expects U.S. comparable-store sales for the 13 weeks that will end January 29, 2010, to be flat to plus-or-minus 1 percent. A year ago, sales on that basis rose 2.4 percent.