Walmart Reports “Difficult” Q1 with Disappointing Earnings

WalmartBentonville, AR—”Frankly, we had a more difficult quarter than expected,” Mike Duke, Walmart’s chief executive, told analysts today on its first quarter earnings call.

For the quarter ended April 30, the retail giant posted earnings of $3.78 billion, or $1.14 a share compared with $3.74 billion, or $1.09 a share, a year earlier. Analysts’ average estimate expected $1.15 a share.

Net revenue rose 1% to $113.43 billion, including membership fees from its Sam’s Club division. But sales, too, fell short of Wall Street’s expectations for $115.78 billion. Comparable store sales, which account for 60% of Walmart’s total revenue, fell 1.4% and marked the first decline since second quarter 2011. At Sam’s Club, comp sales rose 0.2%. (Online sales, however, grew 30% compared to first quarter 2012).

Walmart blamed the increase in payroll taxes, delayed income tax refunds and cold weather for its lackluster earnings. The company reported that visits to its U.S. stores open at least a year fell 1.8% during the quarter, while the average amount spend per visit rose 0.4%.

Duke noted that the Walmart customers tend to be especially sensitive to such changes which he referred to as “considerable headwinds to top-line sales.”

Costs Rise in Bribery Probe

“We do know that the lack of IRS refund checks did hurt our consumers,” Charles Holley, chief financial officer, told analysts. “In fact, the IRS, I think, has said that they’ve estimated that there were about $9 billion less in refund checks, and we certainly cashed less of those checks.”

Noting the bad weather, Duke said Walmart had experienced “latest snowfall in the history of Arkansas reporting” at its headquarters during the period.

For the current second quarter, Walmart forecast earnings of $1.22 to $1.27, up from $1.18 a year earlier. Comparable store sales are expected to be flat to up 2% at U.S. Walmart and up 1% to3% at Sam’s Club.

Walmart also experienced an increase in costs as part of the probe into alleged violations of the U.S. Foreign Corrupt Practices Act and whether the company’s Mexico division spent some $24 million in bribes.

Walmart spent $73 million on FCPA work in the first quarter, rather than the $40 million to $45 million it had anticipated. The company expects to spend another $60 million to $65 million in the second quarter and does not yet know when its own investigation or government probes might end.





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Jeff Prine

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.