Wal-Mart sales under global pressure

Fri Nov 16, 2012 12:40pm IST

Shoppers walk from a Wal-Mart store in Mexico City, August 15, 2012. REUTERS/Edgard Garrido/Files

Shoppers walk from a Wal-Mart store in Mexico City, August 15, 2012.

Credit: Reuters/Edgard Garrido/Files

Related Topics

Stocks

   

REUTERS - Wal-Mart Stores Inc (WMT.N) posted disappointing quarterly sales on Thursday as shoppers in key markets like the United States battled high gasoline prices and unemployment, while store traffic continued to decline in China.

Lower prices for some food and electronics reduced Walmart's U.S. sales, and growth at the company's Sam's Club unit also fell short of Wall Street expectations - rising at half the rate compared with a year ago.

Club members, who pay a fee to shop there, bought cheaper items and traffic from business customers slowed. The results were especially disconcerting to Wall Street since Sam's Club has regularly outperformed Wal-Mart's discount stores.

"When you see a slowdown in sales and then pressure in traffic, that causes investors to be cautious," Brian Yarbrough, analyst at Edward Jones, said of Sam's Club.

Traffic at Walmart's U.S. stores was essentially flat, as shoppers consolidated trips due to higher gasoline prices.

Adding to Wal-Mart's worries, the world's largest retailer also said it has opened internal inquiries or investigations into bribery allegations in Brazil, China and India - additions to its original probe in Mexico. A New York Times article in April disclosed alleged bribery at its Mexican unit.

"We fear this could spread further and be much bigger than just Mexico," Janney Capital Markets analyst David Strasser said.

Chief Financial Officer Charles Holley declined to comment further on the issue during a conference call with reporters.

So far the total cost of the probe has reached $98 million this year.

Wal-Mart shares were down 3.6 percent at $68.73 in Thursday afternoon trading on the New York Stock Exchange as investors absorbed the details of how the global economic slowdown is hitting the company.

"Whether you're in the UK or you're in Argentina, Mexico or China or the U.S. or Canada, I think that all consumers are starting to be under some kind of pressure," Holley said on the conference call.

Wal-Mart did say that U.S. sales so far this month were better than expected, a good sign heading into the holiday shopping season.

In the tough economy, Walmart is still well placed to cater to budget-conscious shoppers, said Natalie Berg, director of global research at Planet Retail.

"But at the end of the day, consumers are still very wary about parting with their hard-earned cash," she said.

Total sales rose 3.4 percent to $113.20 billion for the third quarter ended October 31. Analysts, on average, looked for $114.96 billion, according to Thomson Reuters I/B/E/S. Excluding the impact of currency fluctuations, sales would have been $114.9 billion, the company said.

Sales at Walmart U.S. stores open at least a year, or same-store sales, rose 1.5 percent. The company had forecast an increase of 1 percent to 3 percent, and analysts, on average, had looked for a 1.8 percent gain as management expressed optimism during a recent meeting with analysts.

In contrast, rival Target Corp (TGT.N) on Thursday reported a quarterly profit that beat analysts' expectations, luring shoppers with a wider variety of food products and 5 percent discounts for its cardholders.

While shoppers put millions of dollars of merchandise on layaway, those sales are not registered by Wal-Mart until the items are paid in full. That typically occurs in the fourth quarter, closer to the end of the holiday season.

Traffic at the U.S. stores rose only 0.1 percent as shoppers consolidated trips due to higher gasoline prices.

The Walmart U.S. unit forecast a 1 percent to 3 percent increase in same-store sales for the fourth quarter.

Sam's Club results also disappointed, with same-store sales rising 2.7 percent, excluding gasoline sales, compared with a 5.7 percent increase a year earlier.

Overall, the world's largest retailer earned $3.64 billion, or $1.08 per share, in the third quarter ended October 31, up from $3.34 billion, or 97 cents per share, a year earlier.

Analysts, on average, forecast $1.07 a share.

International sales rose 2.4 percent to $33.16 billion, and would have risen 7.6 percent without currency fluctuations, the company said. Operating profit rose 4.8 percent.

Traffic declined 7.6 percent at its stores in China, continuing a string of declines, and it is facing challenges in Japan due to the economy. Sales there fell 1.8 percent and traffic declined 1.7 percent.

(Reporting by Brad Dorfman in Chicago; Additional reporting by Jessica Wohl in Cincinnati and Phil Wahba in Los Angeles; Editing by Lisa Von Ahn, Jeffrey Benkoe and Tim Dobbyn)

FILED UNDER:

Economic Pulse

Reuters Showcase

Reaction to Budget

Reaction to Budget

India budget unlikely to impact credit rating - agencies  Full Article 

PMI Data

PMI Data

Factory activity growth slows to five-month low in Feb  Full Article 

Documents Leaked

Documents Leaked

Indian Oil suspends official for leaking information - sources  Full Article 

Coal Auction

Coal Auction

India examines coal mine bids amid reports of discrepancies  Full Article 

Ola Buys Rival

Ola Buys Rival

Ola buys rival TaxiForSure for $200 million  Full Article 

Priority Sector

Priority Sector

RBI revises priority sector lending norms  Full Article 

Global Economy

Global Economy

Global stimulus swells as China eases, ECB to start soon on QE  Full Article 

Steel Industry

Steel Industry

Steelmakers hit by uncertainty over import duty hike   Full Article 

HP Buys Aruba

HP Buys Aruba

HP to buy Wi-Fi gear maker Aruba Networks for $2.7 billion  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage