The FINANCIAL — Wal-Mart Stores Inc. on August 18 slashed its earnings guidance for the year and gave a soft outlook for the current quarter as wage increases and investments in its struggling U.S. business pressure profit at the world’s largest retailer, according to Nasdaq.
Shares of Wal-Mart, down 16% this year, fell 3.1% in premarket trading.
“Even if it’s not as fast as we would like, the fundamentals of serving our customers are consistently improving,” said Chief Executive Doug McMillon in a news release. “In this case, our desired changes require investments, which are pressuring earnings this year.”
For the year, the company is now expecting earnings of $4.40 to $4.70 a share, down from its previous forecast for $ 4.70 to $5.05 a share.
Wal-Mart said it expects currency fluctuations to bring down earnings by 15 cents a share, compared with its prior forecast of 13 cents a share, while reduced pharmacy reimbursement rates are expected to weigh on its U.S. margins.
For the current quarter, Wal-Mart forecast earnings of 93 cents to $1.05 a share. Analysts polled by Thomson Reuters had forecast $1.08 a share.
Meanwhile, for the second quarter, Wal-Mart posted a 1.5% increase in U.S. sales, above the company’s expectation for 1% growth, as it drew more shoppers to its stores for the third straight quarter after a long period of declines.
Wal-Mart has now notched four straight quarters of sales growth in the U.S. as the company has moved to improve store operations by offering fresher produce and better customer service.
Still, profit continued to be dented by costly investments in wages and e-commerce. Foreign currency movement also ate into profits to the tune of four cents a share.
In all for the period ended July 31, Wal-Mart said profit fell to $3.48 billion, or $1.08 a share, from $4.09 billion, or $1.26 a share, a year earlier. Wal-Mart had forecast $1.06 to $1.18 a share in earnings.
Revenue edged up slightly to $120.2 billion from $120.1 billion a year earlier. Analysts had forecast $119.7 billion, according to Thomson Reuters.
Excluding currency fluctuations, revenue grew 3.6%.
Online sales, excluding currency impacts, grew 16% in the quarter.