Wal-Mart faces uphill battle as sales rise, but profit margin sinks  The steep discounts Wal-Mart offered customers in an attempt to entice them to spend more money at its stores helped drive revenue higher, but the retail giant said its profits fell when it reported its third quarter financial results on Tuesday.

Sales at Arkansas-based Wal-Mart remained tepid in the company's latest quarter, which ended on October 31. Wal-Mart executives said net sales for the quarter rose 9 percent from the same time the year prior, hitting $109.5 billion. What's more, the company asserted $2.1 billion in net sales in the quarter resulted from acquisitions the firm made in both the United Kingdom and South Africa.

Company officials have worked to reverse lackluster sales at U.S. stores open at least a year. Wal-Mart's customer base has struggled in the wake of a recession that spurred widespread foreclosures in the U.S. and has thus far resulted in the loss of more than 8 million jobs. A decline in confidence prompted reduced consumer spending figures, as Americans scaled back their purchases of everyday items including milk.

The recession incongruously affected low-income earners, negatively impacting their disposable income. Wal-Mart's higher sales in the quarter largely resulted from its slashing the prices of many popular consumer items. The sales and markdowns drove earnings higher, but the company's profit margin suffered, with business costs eating into the added revenue.

The New York Times reports while low-income consumers have cut their purchases of even basic items, luxury shoppers are increasingly paying full prices for designer shoes and handbags and expensive automobiles, among other items. Sales at Saks Fifth Avenue, the upscale department store, surpassed levels logged before the recession hit, underscoring what company chairman and chief executive Stephen I. Sadove described as a "bifurcated market."

Overall U.S. retail sales in October climbed 0.5 percent from the month before, according to Commerce Department data. Economists are forecasting consumer confidence will slow over the coming months, as consumers stop dipping into their savings and opt instead to use their personal income.

Wal-Mart's fortunes are tied to the broader economy, and analysts are projecting the company will suffer a hit in the next quarter, especially following the holiday shopping season. The soaring prices of many raw materials has driven business costs higher, and Wal-Mart is loath to raise prices, as executives contend it would likely cause sales to dip.

"Our customers are still feeling pressured to reduce expenses wherever they can," Wal-Mart chief executive William S. Simon said. "Cost increases in numerous categories were not passed on to our customers in the form of increased prices."
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