By and  on May 13, 2005

NEW YORK — First-quarter results were like night and day for the industry's top two discounters, with Wal-Mart Stores Inc. missing Wall Street estimates by a penny and Target Corp. beating expectations by 2 cents.

And while executives at Target expect market share growth throughout 2005 and beyond, Wal-Mart is anticipating a challenging second quarter, but is still hoping to pick up some momentum in the second half.

Meanwhile Kohl's Corp. posted double-digit earnings and sales for the quarter.

For the three months ended April 30, Wal-Mart delivered a 13.6 percent gain in net income to $2.46 billion, or 58 cents a diluted share, from $2.17 billion, or 50 cents, in the prior period. Excluding the benefit of 3 cents per share from tax and legal resolutions, the company earned 55 cents a share, 1 cent below Wall Street consensus estimates. This was the second time in Wal-Mart's history as a public company that it missed Wall Street estimates. The last time Wal-Mart disappointed was in the first quarter of 1994.

On Thursday, the world's biggest retailer said total revenues in the quarter increased 9.5 percent to $71.68 billion from $65.44 billion. Top-line results were bolstered by a strong performance in sales of domestics and fashion apparel.

Same-store sales in the U.S. were up 2.9 percent, which included a 2.8 percent contribution from Wal-Mart stores and a 3.5 percent gain for Sam's Club.

Lee Scott, president and chief executive officer, said in a prerecorded conference call to Wall Street analysts and investors that the company "missed our sales plan for the quarter in comparable stores by almost 150 basis points." He added that first-quarter results were not up to Wal-Mart standards.

"The quarter started strong as improvements in the economy appear to largely offset the impact of higher gasoline prices, but March proved very difficult. Gasoline prices rose dramatically, Easter was early, and spring was not. This negatively impacted the Wal-Mart division, in particular," Scott said.

Thomas Schoewe, chief financial officer, said the second quarter will be challenging. "The Wal-Mart division expects to see improved sales of seasonal merchandise given the current weather outlook for the latter half of the quarter. However, we anticipate that gasoline prices will continue to impact our customers and result in below planned sales," he added.

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