Bentonville, AR—Although Walmart Inc. posted quarterly results Tuesday that beat Wall Street expectations, the world’s largest retailer forecast second-quarter earnings that could fall short of estimates and said its same-store sales could also drop. The company said consumers are still worried about their personal finances, unemployment and higher fuel prices as it booked a 1.4% drop in first quarter same-store sales at its Walmart chain.
Wal-Mart fared very well during the recession since it attracted consumers who were looking for low-price alternatives. But now, as other retailers are reporting improved sales for the first quarter, Wal-Mart is trying to regain its footing. First-quarter sales at stores open more than a year at Walmart’s U.S. locations saw their fourth quarterly decline in a row.
Wal-Mart may also be seeing the impact of an aggressive price strategy it began in the first-quarter, as gross margin fell to 24.6% from 24.7%. Analysts on average had forecast a 0.6% drop in same-store sales as of Monday, Thomson Reuters reported. In February, Walmart forecast those sales at down 1% to up 1%.
Furthermore, the retail giant’s core consumer isn’t returning to spend as many had hoped.
“Our customers, particularly in the United States, are still concerned about their personal finances and unemployment, as well as higher fuel prices,” Walmart ceo Mike Duke said in a statement. “Our commitment to reducing prices and managing expenses positions us well across the retail landscape.
“For them to note another soft quarter of traffic is not something I wanted to hear,” said Brian Sozzi, analyst at Wall Street Strategies. Still Sozzi noted that Walmart was able to come out ahead on profits through improved margins as it focuses on cutting costs.
International Operations Boost Figures
The store’s international operations are clearly becoming more important as sales for these units rose 21.4%.
For the period ended April 30, Walmart reported a profit of $3.32 billion, or 88 cents a share, up from $3.02 billion, or 77 cents a share, a year earlier. The most-recent quarter included a currency benefit of 2 cents a share. In February, the company projected earnings of 81 cents to 85 cents a share.
Revenue rose 5.9% to $99.1 billion. Analysts forecast $98.45 billion.
Walmart’s Asda unit in Britain also posted a drop in quarterly underlying sales for the first time in four years.
Walmart said it expected second-quarter earnings per share of 93 cents to 98 cents from continuing operations. Analysts had predicted earnings of 98 cents per share.
Vice Chairman Eduardo Castro-Wright, head of Walmart’s U.S. division, said the company was facing more competition on price. Moreover, many of its consumers were cutting back on trips to Walmart stores due to high fuel prices, estimated to have risen 41% from a year ago.