Wal-Mart profit rises, but outlook dims

• Wal-Mart profit rose 8.6%25 in the fourth quarter
• The company expects sales to be flat in the current quarter
• Higher gas prices and payroll taxes%2C late tax refunds get the blame

Wal-Mart experienced a soft end to an otherwise solid year of profit and sales growth as customers started to hold back due to payroll tax increases, higher gasoline prices and delays in income tax refunds.

The company reported fourth-quarter profit gains of 8.6% Thursday. Same-store sales — sales at stores open at least a year — grew 1% in the fourth quarter. That's below the 1.5% growth analysts were expecting.

"We didn't finish quite as strong as we would have liked, primarily due to a slower holiday season," Chief Financial Officer Charles Holley said in a conference call Thursday. He said the company had a sales lull between Thanksgiving and Christmas because of an extra week between the two holidays.

The end of January also didn't fare well as customers started to experience the impact of a 2% payroll tax increase and a three-week delay in tax refunds.

Wal-Mart provides check-cashing services, and this time last year it had cashed $3 billion in tax refund checks. This year, it has so far cashed $1.7 billion worth of checks, Wal-Mart U.S. CEO Bill Simon said during the call.

It's still unclear how this is affecting spending though, he said. "We hear them (customers) talking about it more than we're able to detect it in their sales patterns."

Investors were bracing for a subdued report after a Bloomberg News story last week leaked an e-mail from a top executive characterizing the first two weeks of February as "a total disaster."

Wal-Mart acknowledged in Thursday's report that February started "slower than planned" but noted that it was largely due to the delay in tax refund checks.

"We are confident that our low prices will continue to resonate, as families adjust to a reduced paycheck and increased gas prices," Simon said in a press release.

Wal-Mart shares rose 1.5% to $70.26 Thursday.

For the current quarter, Wal-Mart expects revenue at stores open at least a year at its U.S. namesake business to be flat with last year. That represents a slowdown from the 1% increase in the fourth quarter.

That growth pace has slowed in recent quarters.

Wal-Mart says it earned $5.6 billion, or $1.67 per share, in the quarter ended Jan. 31. That's up from $5.2 billion, or $1.50 per share, a year earlier.

Net sales rose 3.9% to $127.1 billion.

Earnings topped estimates of $1.57 per share, but net sales fell short of the $127.8 billion estimate.

The company says it expects earnings per share to range from $1.11 per share to $1.16 per share for the first quarter. That's below analysts' expectations of $1.18 per share, according to FactSet.

For the year, Wal-Mart expects earnings per share of $5.20 to $5.40. Analysts expect $5.38 per share, according to FactSet.