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Earnings Preview: Wal-Mart to report 3Q results

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November 12, 2013 12:31 PM EST | AP

NEW YORK (AP) — Wal-Mart Stores Inc. is slated to report third-quarter earnings results before the market opens Thursday, offering clues on its shoppers' mindset heading into the holiday season.

WHAT TO WATCH FOR: Wal-Mart's figures will be examined for signs about the financial health of its shoppers, both in the U.S. and abroad. In particular, analysts will be dissecting any comments on how the retailer's early push for holiday sales has fared. They'll want to get an update on its holiday layaway program and more details on its plans to discount during what's expected to be a fiercely competitive holiday season.

Wal-Mart is pushing the start of the blockbuster deals earlier into Thanksgiving evening, following the lead of other retailers such as Best Buy. The world's largest discounter announced Tuesday that it will kick off the holiday shopping season at 6 p.m. on the holiday, two hours earlier than a year ago. The discounter also pulled forward by nearly a month seven big deals on items like TVs and tablets that were originally reserved for the day after Thanksgiving and so-called Cyber Monday.

Like other merchants, Wal-Mart is grappling with a yo-yo economic recovery that has been tough on low-income shoppers, and is causing middle- to upper-income shoppers to remain frugal about their purchases.

While jobs are easier to get and the turnaround in the housing market is gaining momentum, the improvements have not been enough to fuel higher levels of consumer spending for most Americans. Most are juggling tepid wage gains with higher costs of living. On top of that, Americans are still trying to digest the 2 percentage-point increase in payroll taxes that took effect Jan. 1.

Against this background, Wal-Mart's U.S. business has been challenged. The discounter in August cut its annual profit and revenue outlook for the year after reporting second-quarter results that missed Wall Street estimates.

The company's U.S. Wal-Mart stores, which account for 59 percent of its total sales, posted the second straight quarter of declines in a key revenue figure after six consecutive quarters of increases. Revenue at stores open at least a year — considered an important measure of a retailer's performance — fell 0.3 percent at Wal-Mart's U.S. namesake business. That's below the 0.7 percent gain analysts were expecting.

Adding in Sam's Club and international stores, revenue at stores open at least a year was flat compared with a year ago. It rose 1.7 percent at Sam's Club.

Revenue at stores open at least year, a key measurement for retailers because it excludes the effect of stores that open or close during the year, also fell below expectations.

Investors also will want an update on the company's investigation into allegations of bribery in its Mexico operations, which surfaced in late April 2012. Wal-Mart, based in Bentonville, Ark., has launched its own internal investigation and is working with government officials in the U.S. and Mexico.

Wal-Mart has said it's been investing in fortifying controls overseas and has hired new executives to oversee its efforts to comply with laws against foreign bribes. Starting this year, the retailer is also tying some of its executives' compensation to how successful Wal-Mart is overhauling its compliance division.

WHY IT MATTERS: Wal-Mart's results are considered a bellwether of consumer spending because the company draws nearly 10 percent of all nonautomotive retail spending in the U.S.

WHAT'S EXPECTED: Analysts expect earnings of $1.13 per share on net sales of $116.88 billion, according to FactSet. The sales estimate exclude figures from membership fees from Sam's Club.

LAST YEAR'S QUARTER: Wal-Mart earned $1.08 per share on net sales of $113.92 billion.