By Jessica Wohl
CHICAGO (Reuters) - Wal-Mart Stores Inc's <WMT.N> profit growth is taking a back seat to the main issue on the minds of investors: finally fixing U.S. sales.
Turning around nearly two years of declining sales at U.S. stores open at least a year is the top retailer's top priority. Tuesday's quarterly results will show if early efforts to lure shoppers into stores and grow same-stores sales have paid off.
Wal-Mart is expected to post its eighth consecutive quarterly decline in U.S. same-store sales. It forecast such sales would be flat to down 2 percent and analysts on average expect a drop of 1.3 percent.
If such sales come close to the high end of Wal-Mart's expectations, it could generate more interest in its shares, which currently trade at about 12 times expected earnings and have risen about 4 percent so far this year.
"We think that the stock is close to breaking out of kind of this rut that we've been in for really the last decade, if Bill Simon and his management team can execute," said Channing Smith, managing director at Capital Advisors Growth Fund, speaking of Wal-Mart's U.S. president and chief executive.
"The proof will be in the pudding and that's the same-store sales. Are those improving or are they not?" said Smith, whose firm holds Wal-Mart shares and has about $900 million in assets under management.
PROFIT OVERSHADOWED BY SALES
Wal-Mart spruced up its U.S. operations during the quarter, including a renewed focus led by Simon promising low prices on a broader array of goods.
Smith said he is willing to give Wal-Mart a couple of quarters to see how the strategy unfolds. He applauded recent efforts, such as Wal-Mart's April acquisition of social media firm Kosmix, which should help beef up its online business.
Tuesday's report should show a jump in profit helped by strong international results.
However, higher gas and food prices have taken their toll on budget-conscious U.S. shoppers, some of whom are visiting rivals such as dollar stores more often. Some shoppers have cut back on trips to Wal-Mart and curbed purchases of clothing, shoes, video games and other items, according to a new survey.
Nearly 14 percent of U.S. shoppers who have gone to Wal-Mart this year did so less often, according to the America's Research Group/UBS Consumer Mind Reader Survey.
"Our research says Wal-Mart is going to struggle for the next 18 months or longer," said Britt Beemer, chairman and founder of America's Research Group.
(Reporting by Jessica Wohl; editing by John Wallace)