Walmart Trims Forecast on Weaker Comp Sales

Walmart checkoutBentonville, AR—An estimated one in seven Americans—some 48 million—were reportedly affected by the $5 billion cuts in the federal governments food stamps program.

That repercussions of those cuts has been felt up the economic ladder,  striking at the nation’s largest retailer.

On Friday, Walmart warned that its fourth quarter comparable store sales were lower than it expected both for Walmart U.S. and Sam’s Club. Previously the retail giant forecast basically flat comps at Walmart U.S. and flat to 2% up at its Sam’s Club.

The company blamed the reduced food stamp benefits as hurting those comp sales along with several other causes. Namely, bad weather and costs tied to its store closures in Brazil and China and its Sam’s Club restructuring in the United States.

Consequently, Walmart now estimates its fiscal full year earnings at or slightly below the low-end of its previous outlook for $5.11 to $5.21 a share. Its fourth quarter will also be on the lower end of its estimated range of $1.60 to $1.70 a share.

The warnings comes about a week after Walmart announced that it was eliminating 2,300 workers at its Sam’s Club division. The layoffs, which cut 2% of the membership club’s U.S. employee count of about 116,000, mark the largest since 2010 when the Sam’s Club unit laid off 10,000 workers.

“Walmart caters to lower-income consumers which have been hit disproportionately hard relative to higher-income consumers,” said Morningstar analyst Ken Perkins.

Although Walmart cited the reduced food stamp benefits as one of the reasons for its downward looking warnings, the retailer didn’t disclose how many of its customers might be affected by the food stamp cuts.

According to Cowen analyst Tal Lev, about 20% of Walmart shoppers are food stamp users.

 

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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