Wal-Mart cuts profit outlook on shopper worries
By Anne D'Innocenzio ,APNEW YORK -- Wal-Mart Stores Inc., the world's biggest retailer, said the weak global economy continues to batter its low-income shoppers.
August 17, 2013, 12:04 am TWN
The chain on Thursday cut its annual profit and revenue outlook for the year after reporting second-quarter results that missed Wall Street estimates. The company's stock fell nearly 3 percent on the news.
Wal-Mart's sober assessment adds to worries about consumer spending that arose when Macy's Inc. lowered its profit expectations for the year after reporting disappointing results on Thursday and Kohl's Corp. did the same on the following day even after posting solid results.
But Wal-Mart's results are even more troubling because it is considered an economic bellwether, with the company accounting for nearly 10 percent of nonautomotive retail spending in the U.S. Wal-Mart's latest performance appears to show that many people continue to struggle in the U.S. and abroad.
In the U.S., while jobs are easier to get and the housing market is gaining momentum, these improvements have not been enough to get Americans to spend. On top of that, Wal-Mart said Americans continue to struggle with a 2 percentage-point increase in the Social Security payroll tax since Jan. 1.
During a call with the media, Wal-Mart Chief Financial Officer Charles Holley said the top three concerns among its customers are jobs, food costs and gas and energy prices.
“The retail environment remains challenging in the U.S. and our international markets, as customers are cautious in their spending,” Holley said in a statement, noting a “reluctance” among customers to spend on things items like flat-screen TVs.
The Arkansas-based retailer said second-quarter net income rose 1.3 percent to US$4.07 billion, or US$1.24 per share, for the three months ended July 31. That compares with US$4.02 billion, or US$1.18 per share, a year earlier.
Excluding a one-time charge for a certain non-income tax matter, earnings per share would have been US$1.25. That matches Wall Street's estimates.
Net sales rose 2.4 percent to US$116.2 billion. That figure excludes membership fees from its Sam's Club division. The number came below estimates of US$118.09 billion in net sales, according to FactSet research firm.