Wal-Mart surprises the Street

Wal-Mart Stores Inc. on Tuesday said first-quarter profits rose 6.9 per cent, but issued a cautious outlook for the current quarter and warned that the economy will be a ``critical factor`` in 2008.

The world`s largest retailer beat Wall Street`s expectations and cited improved inventory management and better customer service. How well those changes, part of a strategy begun two years ago, will continue to offset a sustained downturn in the economy is far from clear.

``There are still uncertainties during the rest of the year,`` President and CEO Lee Scott said in a recorded call for investors. ``The economy is playing a critical factor in 2008.``

Wal-Mart shares fell more than 2 per cent, or $1.22, to $56.80 in afternoon trading.

Wal-Mart earned $3.02 billion, or 76 cents per share, in the three months ended April 30, up from $2.83 billion, or 68 cents per share, a year earlier.

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