Currency instability weighs on Wal-Mart
WAL-MART Stores, the world’s biggest retailer, cut its earnings forecast for the year, hurt by currency fluctuations and a pay rise for US employees.
The company expected profit of $4.40 (R56.88) to $4.70 a share this financial year, which runs through January, according to a statement yesterday. Wal-Mart previously forecast earnings of up to $5.05 a share.
Chief executive Doug McMillon is coping with a strong dollar overseas, which has cut into revenue.
He has also raised wages in the US, aiming to retain more employees and improve customer service. While those efforts had increased costs, they were helping fuel growth, McMillon said.
Wal-Mart’s same-store sales, excluding currency and fuel spending, rose 1.5 percent last quarter. That beat the 1 percent projected by analysts, according to Consensus Metrix.
“The changes we need to make require investment, and we’re pleased with the steps we’ve taken,” McMillon said on a prerecorded conference call for investors.
“Even if it’s not as fast as we’d like, the fundamentals of serving our customers are consistently improving, and it’s reflected in our comps and revenue growth.”
Wal-Mart shares fell as much as 3.5 percent to $69.42 in early trading in New York after the results were released. The stock slid 16 percent this year.
Wal-Mart also posted second-quarter earnings that missed analysts’ estimates. Profit was $1.08 a share in the period, excluding some items, the company said. Analysts had expected $1.12 a share, according to Bloomberg data.
Lower petrol prices likely helped Wal-Mart increase foot traffic because consumers were less concerned about the cost of driving, but retailers have been struggling to get consumers to spend more of that money they are saving. – Bloomberg