Wal
Bloomberg News
, the world's largest retailer, reported stagnant same-store sales and cut its earnings forecast for the year, hurt by higher health-care costs and slow traffic at its supercenters.
Earnings for the year will now be $4.90 to $5.15 a share, down from a previous range of as much as $5.45, the Bentonville, Arkansas-based company said today in a statement. Sales at U.S. Wal-Mart and Sam's Club stores open at least 12 months were little changed last quarter, which ended Aug. 1.
Chief Executive Officer Doug McMillon, who took the post in February, is struggling to revive U.S. growth in the face of a slow economic recovery. The retailer hasn't posted a same-store sales gain for six quarters, and customers are making fewer trips to big-box retailers. Cuts in government assistance also are leaving low-income shoppers with less money to spend.
'Lower-middle-income households have participated much less in the economic recovery than other groups,' Patrick McKeever, an analyst from MKM Partners in New York, said in a note before the earnings release. 'About 20 percent of Wal-Mart's customers are on government assistance,' and a reduction in food-stamp payments is harming U.S. sales, he said.
Sluggish Stock
Wal-Mart's stock was little changed in early trading in New York. The shares had dropped 5.9 percent this year through yesterday, trailing the 5.3 percent gain for the Standard & Poor's 500 Index.
In cutting its forecast, Wal-Mart cited higher U.S. health-care costs and increased spending in e-commerce, where it aims to challenge Amazon.com Inc.'s dominance. The company sees health-care expenses growing by more than $500 million. Wal-Mart and its subsidiaries employ about 2.2 million people worldwide, and the company has more than 11,000 stores.
Wal-Mart and federal authorities also are investigating possible violations of the Foreign Corrupt Practices Act in the company's operations in Mexico, Brazil, China and India. FCPA and compliance-related costs were about $43 million last quarter, with $31 million going to ongoing investigations and $12 million going toward an effort to improve its global compliance program.
Profit last quarter was $1.21 a share, matching the average analyst estimate compiled by Bloomberg. Sales rose 2.8 percent to $120.1 billion in the period, helped by e-commerce orders and the opening of new smaller-format stores.
Small Stores
Wal-Mart said in February it was increasing its capital spending by an additional $600 million this year to add more Neighborhood Market and Express stores. Those smaller-format outlets have outperformed its supercenters and Sam's Club locations. Wal-Mart executives said today on a call that the company plans to open about 90 Express stores this fiscal year.
Total revenue at Wal-Mart's U.S. stores rose 2.7 percent to $70.6 billion, while international sales climbed 3.1 percent to $33.9 billion. Sam's Club's net sales gained 2.3 percent to $14.9 billion.
'We wanted to see stronger comps in Wal-Mart U.S. and Sam's Club,' McMillon said in the statement. 'Stronger sales in the U.S. businesses would've also helped our profit performance.'
To contact the reporter on this story: Renee Dudley in New York at rdudley6@bloomberg.net
To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net Kevin Orland
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