Wal-Mart Stores Inc., the world's largest retailer, posted first-quarter earnings that missed analysts' estimates after U.S. sales grew more slowly than projected and currency fluctuations ate into profit.
Earnings amounted to $1.03 a share, excluding some items, the Bentonville, Arkansas-based company said in a statement Tuesday. Analysts had predicted $1.05 on average, according to data compiled by Bloomberg. Revenue also was light last quarter, with the company's U.S. supercenters and Sam's Club locations posting slower growth than estimated.
Chief Executive Officer Doug McMillon faces the dual challenges of reviving growth at home and contending with the strong dollar overseas, which has whacked the value of its international revenue. Currency effects are now expected to reduce sales by $14 billion this year, up from a previous projection of $10 billion. Wal-Mart gets more than a quarter of its revenue from international markets.
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"We expect currency to remain a significant headwind for the year," Chief Financial Officer Charles Holley said on a conference call.
Wal-Mart shares fell 2.5 percent, to $77.89, as of 9:33 a.m. in New York. The shares had declined 6.9 percent this year through Monday's close.
McMillon, 48, has been working on a turnaround plan that includes cutting expenses and boosting efficiency. So far this year, he has eliminated a layer of management within stores and raised the wages of rank-and-file workers. But the company is struggling with a broader shift in how shoppers spend their money.
"Consumers are spending away from traditional bricks-and-mortar retail as they devote more of their disposable income to cars, homes, technology, etc.," Patrick McKeever, an analyst for MKM Partners, said in a report before Wal-Mart's results were released. "And they are also saving."
Wal-Mart U.S. comparable-store sales—a closely watched benchmark—rose 1 percent, excluding fuel. Analysts had projected a 1.5 percent gain. Its Sam's Club outlets, which compete with Costco Wholesale Corp., posted a 0.4 percent increase. That compares with a prediction of 1.6 percent. Total revenue slipped less than 1 percent, to $114.8 billion, missing an estimate of $116.2 billion.
The retail chain and its subsidiaries employ about 2.2 million people worldwide, and the company has more than 11,000 stores. Wal-Mart, the nation's largest private employer, increased the wages of about 500,000 of its 1.3 million U.S. workers in April. Hourly rates rose to $9 an hour, with a boost to $10 planned for next year.
While the move was applauded by labor groups, higher spending on wages and other investments have raised concerns for Wal-Mart investors. The company has warned that it will be in heavy investment mode for the next two years as the chain improves the way it handles inventory and lets customers pick up online orders at stores.
On Tuesday, Wal-Mart said that second-quarter earnings would be $1.06 to $1.18 a share. Analysts estimated $1.17 on average. Currency effects are expected to reduce profit by 13 cents this year, up from a previous estimate of 10 cents, Wal-Mart said.
Wal-Mart's effort to grab a bigger piece of the e-commerce market also weighed on profit last quarter. As part of the push, the company is rolling out a $50-a-year shipping program that will compete with Amazon Inc.'s Prime.
"The company's continued investments in e-commerce, as well as wages and training for U.S. associates, were headwinds on our operating income during the quarter," Claire Babineaux-Fontenot, the company's treasurer, said on the conference call.
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