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Local & Regional News
Thu August 15, 2013
Wal-Mart Warns Of Challenging Retail Environment, Reduces Forecast
Sales grew and so did profits, but Bentonville-based Wal-Mart had a rocky quarter as same-store sales struggled and the retail giant warned of a challenging environment.
The company posted total quarterly revenues of $116.95 billion compared to $114.28 billion one year ago. Net income rose to $4.07 billion, or $1.24 per diluted share, versus $4.02 billion, or $1.18 per diluted share, in last year’s comparable period. Wall Street estimates were looking for Wal-Mart to record $1.25 per diluted share.
“We delivered a solid increase in earnings per share for the second quarter,” said Mike Duke, Wal-Mart Stores, Inc. president and CEO. “Consolidated net sales and our Walmart U.S. comp were below expectations. While the retail environment was challenging across all of our markets, the Walmart U.S. and Sam’s Club businesses improved comp sales from the first quarter, and the growth of International sales was consistent.”
Same-store sales at its U.S. outlets actually were down 0.3% for the quarter, although its smaller Sam’s Club division same-store sales rose 1.7%.
Wal-Mart said modest inflation and an increase in payroll taxes in the U.S. contributed to the struggling numbers. Duke said that Wal-Mart was taking steps to improve its performance and control expenses in the second half of the year, but stopped short of saying what those changes might entail.
“There are areas of our business where we can do a better job, and we will. I’m confident in our associates’ abilities to deliver for our customers with EDLP [everyday low prices] and for shareholders with improved expense savings,” Duke said.
The rocky quarter led Wal-Mart to revise its earnings guidance for the remainder of the fiscal year, which ends next January.
Charles Holley, Wal-Mart CFO, said that sales expectations were being slashed in half for the balance of 2013.
“The retail environment remains challenging in the U.S. and our international markets, as customers are cautious in their spending. Net sales in the first six months were below our expectations, so we are updating our forecast for net sales to grow between 2 and 3 percent for the full year versus our previous range of 5 to 6 percent,” said Holley. “This revision reflects our view of current global business trends, and significant ongoing headwinds from anticipated currency exchange rate fluctuations.”
The once unstoppable international sector of Wal-Mart’s business also experienced pressure in the quarter. It’s double-digit growth has slowed in recent quarters, and in the most recent one, the international division only saw a 2.9% growth in sales while operating income actually slipped 1.3%.
“Across our international markets, growth in consumer spending is under pressure,” said Doug McMillon, Walmart International president and CEO. “Consumers in both mature and emerging markets curbed their spending during the second quarter, and this led to softer than expected sales. While this creates a challenging sales environment, we are the best equipped retailer to address the needs of our customers and help them save money.”
Wal-Mart shares (NYSE: WMT) were poised for lower trading in pre-market activity. The company’s stock closed trading Wednesday (Aug. 14) at $76.40. Wal-Mart’s shares have traded between $67.37 and $79.96 during the past 52 weeks.