Walmart Cuts Full Year Forecast as Costs Hit Profit

WalmartBentonville, AR—Walmart reported total a slight rise in its second quarter profit but the retail giant still cut its full-year forecast saying higher employee healthcare csts and increased investment in e-commerce offset gains.

For the quarter ended July 31, Walamart posted net income of $4.09 billion, or $1.26 a share, in the quarter ended July 31 from $4.07 billion, or $1.24 per share, a year earlier. That was in line with analysts’ average estimate.

Net sales rose by a better-than-expected 2.8% to $120.13 billion from $116.83 billion, a year earlier—attributable to higher sales in Walmart’s smaller-format stores.

But comparable store sales were flat for the quarter– the sixth straight quarter of declining or no growth.

Beat Amazon?

CEO Doug McMillon blamed intense competition and weak consumer spending for sluggish U.S. comp sales.

“We’re encouraged by the performance of our small-format stores and e-commerce, areas where we’re investing significantly this year. But we wanted to see stronger comps overall in Walmart U.S.,” McMillon said in a statement.

Walmart said its e-commerce business delivered double-digit growth for the second quarter. But the company lowered full-year online sales growth to 25% from about 30%.3

Walmart cited increased investment in its online business and higher employee health-care costs as reasons for cutting full-year earnings forecasts from continuing operations to $4.90 to $5.15 a share from $5.10 to $5.45.

Going forward, Wal-Mart has the best chance of beating online sales leaderAmazon said Jan Kniffen, chief executive of retail research and consulting firm J. Rogers Kniffen Worldwide Enterprises.

“We know only about 10%  of … [all] sales are coming online,” the former department store executive told CNBC. “More people buy more online every quarter every year.”

Last month, the retailer announced its Walmart U.S. CEO would  exit the company which has struggled recently to deliver positive comparable sales.

Since Walmart is the country’s biggest retailer, its earnings are watched closely as a gauge of the health of the American consumer.

 

 

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Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com