WalMart Offers Weak Outlook, US Sales Keep Falling
by The Daily Lede
Wal-Mart Stores Inc. offered a weak earnings forecast for the current quarter and posted another drop in U.S. sales, its fifth consecutive quarterly decline.
Bentonville, Ark.-based Wal-Mart pointed to investments in e-commerce, headwinds from higher health-care costs in the U.S. and increased investments in Sam’s Club membership programs for the potential drop in profit, echoing its previous warnings.
Shares fell about 3% premarket as results for the quarter ended April 30 also disappointed.
The world’s largest retailer has suffered weaker store traffic in recent periods–as dollar stores and online marketplaces have cut into its business–prompting the retailer in February to offer soft guidance for the year and warn of continued economic pressure.
Traffic at U.S. stores dropped 1.4% in the latest period, the sixth consecutive decline. Meanwhile, sales at Wal- Mart locations in the U.S., excluding newly opened or closed stores, fell 0.1% though the company said a solid start to spring and a strong Easter drove sales in the second half of the quarter.
“Like other retailers in the United States, the unseasonably cold and disruptive weather negatively impacted U.S. sales and drove operating expenses higher than expected,” Wal-Mart Chief Executive Doug McMillon said.
For the current quarter, Wal-Mart said it expects earnings of $1.15 to $1.25 a share, below analysts’ expectations of $1.28 and compared with $1.24 a year earlier. Sales at its namesake U.S. locations are expected to be relatively flat.
To combat the pressure on its sales figures at its big-box super stores, Mr. McMillon, who took over in February, has said the company would focus more on opening smaller stores and beefing up its online presence.
While Amazon.com Inc. still dominates e-commerce in terms of overall sales, Wal-Mart has spent a good deal of capital and has bought several businesses to seize a growing share of the market as consumers are increasingly making traditional retail purchases online instead of at brick-and-mortar locations. Earlier this month, trade publication Internet Retailer said the Arkansas-based retail giant last year marked the first time in a decade that its online sales growth outpaced Amazon.com’s.
“Our investments are focused on improving customer experience and fulfillment capacity,” Mr. McMillon said. “We’re working to deliver a relevant, personalized and seamless customer experience across all channels to further grow sales.”
Online sales had a 0.3% positive impact on U.S. sales in the most recent quarter.
Wal-Mart posted a profit of $3.59 billion, or $1.11 a share, down from $3.78 billion, or $1.14 a share, a year earlier. Earnings from continuing operations came in at $1.10 a share, hit by three cents a share by severe winter weather.
The company in February projected earnings of $1.10 to $1.20 a share, a range that fell below consensus views at the time.
Revenue rose 0.8% to $114.96 billion, while currency exchange rate fluctuations hurt sales by about $1.6 billion. Analysts were looking for $116.3 billion.
E-commerce sales increased about 27%. Wal-Mart also said its tax rate was higher than expected and warned its current-quarter rate will likely hit the high end of its guidance.
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