Inclement weather hurts Wal-Mart in the first quarter, outlook weak
By Mae Anderson, AP
May 17, 2014, 12:06 am TWN
NEW YORK--Wal-Mart's first-quarter net income fell 5 percent as bad winter weather and financial struggles kept customers from spending at the world's largest retailer.
The company's shares fell nearly 2 percent as Wal-Mart reported results that missed Wall Street's expectations for the third time in five quarters and gave a weak second-quarter earnings forecast.
The results underscore the big challenges facing Wal-Mart's new CEO, Doug McMillon, who took over the top role on Feb. 1. The retailer 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 are having a hard time stretching their money between paychecks.
For the period ended April 30, the Bentonville, Arkansas, company earned US$3.59 billion, or US$1.11 per share. That compares with US$3.78 billion, or US$1.14 per share, a year ago.
Wal-Mart Stores Inc. said that bad weather hurt earnings by about 3 cents per share. Its performance was also dinged by a higher-than-expected tax rate.
Income from continuing operations was US$1.10 per share. Analysts, on average, expected earnings of $1.15 per share, according to a FactSet survey.
"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," McMillon said in a statement.
Not only did weather affect store traffic, it disrupted the supply chain, slowing production and backing up trucking transportation around the country, the company said.
But Wal-Mart has been suffering from weak sales in the U.S. for some time. Sales at U.S. stores open at least a year dipped 0.2 percent in the quarter, the fifth consecutive quarter of decline the metric, considered a key gauge of a retailer's financial performance. Analysts had been expecting the measure to be flat.
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, the Nov. 1 expiration of a temporary boost in food stamps is hurting its shoppers' ability to spend.
"Traffic continues to be negative, despite investments in price, TV marketing, and social marketing," said Belus Capital Advisors analyst Brian Sozzi. "Wal-Mart's traffic troubles are part related to weather in the first quarter, but also very reflective in how people are now shopping (online) and the company not being able to full play in that trend."
Total revenue rose 1 percent to US$114.96 billion. Wall Street was calling for higher revenue of $116.43 billion.
The stronger dollar hurt revenue by about US$1.6 billion. Excluding that, revenue would have risen 2 percent.
McMillon said in a prerecorded call that U.S. sales rose during the second half of the quarter, but that Sam's Club had lower-than-expected sales. While membership income climbed, McMillon said it was mostly because of a fee increase started last year.