Wal-Mart Readies Report On Earnings

This post first appeared on Minyanville.

After besting same-store sales estimates last week, the world's biggest retailer is about to tell Wall Street how much money it managed to squeeze out of struggling consumers in the first three months of 2008. With its stock up more than 20% this year -- the strongest showing of any Dow component -- Wal-Mart (WMT) reports earnings before the bell tomorrow.

According to Bloomberg, analysts are expecting net income of $2.9 billion, or $0.75 per share, up from $0.68 one year ago. Revenue is predicted to come in at $9.3 billion, a 7.1% increase from last year.

Wal-Mart's CEO, H. Lee Scott, is waging a price war on competitors Sears (SHLD) and Target (TGT). Despite margins being squeezed on both sides -- higher input costs and lower priced goods -- Wal-Mart has managed to capture market share while maintaining strong earnings growth.

Like other retailers, Wal-Mart is also looking to cash in on recently mailed tax rebates. The company plans to cash the stimulus checks free of charge and is offering special discounts to further stretch the government dole out.

Wal-Mart's challenge is not just keeping current customers entrenched, but attracting new ones. Many well-to-do consumers prefer swanky grocery stores like Safeway (SWY), or specialty markets like Whole Foods (WFMI). As economic malaise spreads upward, Wal-Mart would be wise to expand its marketing -- and product offering -- to attract wealthy converts.

Discounted prices or not, everyday consumers wake up with less in their pockets. Wal-Mart may be the preferred repository for shoppers' precious dollars (or euros, or pounds, or pesos), but that doesn't mean there will be enough cash to maintain its impressive performance. It may continue to perform better than competitors, but as Toddo is fond of saying, "You can't spend relative performance."