• by Sarah Mahoney  @mahoney_sarah, November 14, 2007

While most retailers are forecasting ho-hum holidays, Wal-Mart is now looking on the brighter side. The Bentonville, Ark.-based retailer, in releasing its third-quarter earnings, says its price-focused marketing strategy will pay off in the season ahead, even though it's being realistic about the economic pressures on its core customers.

"During the Christmas and holiday season, our price leadership position will benefit both our customers and the company," its CEO says in the release. "We have set the stage for a successful fourth quarter. We are well positioned to win." As a result, the company says its fourth-quarter earnings are likely to come in at the higher end of earlier estimates. For the quarter, it expects U.S. comparable store sales to be between flat and 2%.

The company's net sales for the third quarter of its fiscal 2008 were $90.9 billion, an increase of 8.8% from the third quarter in the prior year--a gain it says represents an improvement in U.S. operations, including inventory management. Net income from continuing operations for the quarter was $2.86 billion. Comparable-store sales for the period increased 1.5% overall for the quarter, including gains of 1% in Wal-Mart Stores, as well as 3.9% at Sam's Club.

In a pre-recorded conference call, Eduardo Castro-Wright, president of U.S. stores, says the company's best results were in grocery, health and wellness, and entertainment, with sales in its pharmacies particularly strong. In electronics, consumer spending has been solid, with sales of flat-screen TVs up 110% over the third quarter last year. Halloween sales gained 4% on a comparable basis, and in apparel--the retailer's Achilles heel in recent years--consumers have been responding to a wider assortment of separates priced at $10 and under.

"In the current economic environment, it's more important than ever to focus on low prices," he says, adding that emphasis will continue through the holiday selling season.

Wal-Mart came out swinging this year, lowering prices on Halloween and pressuring other retailers to start holiday price-cutting earlier than usual. And it's still at it, offering more rollbacks on electronics and other items.

Separately, it announced its top 12 toys of Christmas, including the Kid Tough Digital Camera, New Elmo and Smart Cycle, all from Fisher-Price; and "Spider-Man 3" Movie Action Figure, Power Tour Electric Guitar, FurReal Squawkers Parrot, Littlest Pet Shop Paws Off Electronic Diary, and a game version of "Are You Smarter than a 5th Grader," all from Hasbro. Dolls include Little Mommy Real Loving Baby Doll (Mattel) and Hannah Montana Fashion Collection (Play Along.)