Reader comments on sltrib.com are the opinions of the writer, not The Salt Lake Tribune. We will delete comments containing obscenities, personal attacks and inappropriate or offensive remarks. Flagrant or repeat violators will be banned. If you see an objectionable comment, please alert us by clicking the arrow on the upper right side of the comment and selecting "Flag comment as inappropriate". If you've recently registered with Disqus or aren't seeing your comments immediately, you may need to verify your email address. To do so, visit disqus.com/account.
See more about comments here.
Wal-Mart 3Q profit up, but cuts outlook
New York » Wal-Mart shoppers — much like many Americans — still feel like they're in a recession.
In the uneven economic recovery, their bills are going up, but their wages are not. While the well-heeled crowd benefits from gains in the stock market, they're still struggling with a higher payroll tax. And shopping for bargains isn't a hobby, but a necessity.
For these reasons, the world's largest retailer on Thursday cut its annual outlook for the second time in three months and offered fourth-quarter guidance that's below Wall Street's expectations. On the news, its shares fell 10 cents to $79.
The disappointing results and forecast show how vulnerable Wal-Mart — and its customers — are to the ups and downs in the economy. Wal-Mart's shoppers are dealing with a 2 percentage point increase in the Social Security payroll tax since Jan. 1. A partial 16-day government shutdown this year also hurt business in areas with large military bases. And the Nov. 1 expiration of a temporary boost in government food stamps could also hurt customers' ability to spend, though the discounter says it's too early to know.
On top of that, Wal-Mart also is facing increased competition from online king Amazon.com, which is opening warehouse hubs closer to cities to speed up delivery. Another threat: dollar stores, which are wooing customers with convenient locations and name-brand products at discounted prices.
"The retail environment, both in stores and online, remains competitive," said Mike Duke, president and CEO of Wal-Mart Stores Inc. "At the same time, some customers feel uncertainty about the economy, government, jobs stability and their need to take care of their families through the holidays."
Wal-Mart said it earned $3.74 billion, or $1.14 per share in the three-month period ended Oct. 31. That compares with $3.64 billion, or $1.08 per share, in the year-ago period. Net sales rose 1.6 percent to $114.88 billion, up 1.6 percent in the year ago period.
On a constant currency basis, net sales would have been $116.2 billion.
Analysts were expecting earnings of $1.13 per share on net sales of $116.9 billion.
Overall, total sales increased 2.4 percent for Wal-Mart's U.S. business, 1.1 percent at Sam's Clubs and 0.2 percent at Wal-Mart's international business.
But the company reported a decline in a figure that the retail industry uses to gauge a company's performance. Revenue at stores open at least a year was down 0.1 percent for all U.S. stores, including a 1.1 percent increase at Sam's Clubs.
And Wal-Mart's U.S. stores, which account for 58 percent of the company's total sales, had a third straight quarter of decline, with revenue at stores open at least a year falling 0.3 percent. Wal-Mart blamed slower spending in the beginning of the quarter for the decline, but said business picked up in September and October.
There was a bright spot, though. Revenue at stores open at least a year rose 3.4 percent at its smaller Neighborhood Market stores, which are only about 38,000 square feet and carry fresh produce, meat, and beauty products. Neighborhood Market stores currently number 300 but Wal-Mart plans to use them to grow its business.
Going forward, Wal-Mart, like other rivals, is making changes heading into the holiday shopping season in the U.S. It's bringing back its holiday layaway program and tweaking prices on TVs and other popular holiday products more than last year. The company also is pulled ahead up some of its deals that are reserved for Thanksgiving weekend to start on Nov. 1
Wal-Mart said it expects adjusted earnings per share to be $1.60 to $1.70 for the fourth quarter.
For the year, it expects $5.11 to $5.21, compared with its forecast of $5.10 and $5.30 per share in August. That was downgraded from May's forecast.
Analysts expected adjusted earnings of $1.69 per share for the fourth quarter and $5.19 per share for the full year, according to research firm FactSet.