Walmart Shares Down as International Growth Slows

Walmart shares down as international growth slowsBy Jessica Wohl

Wal-Mart Stores Inc's (WMT) full-year profit may miss analysts' expectations as growth slows in its international markets, pressuring the company even as its U.S. discount stores continue to prosper.

The world's largest retailer, viewed as a barometer of economic activity, said on Thursday its cash-strapped customers tend to spend more at the beginning of the month when they get their paychecks. That "paycheck cycle" has extended its reach to the company's markets beyond the United States.

"It became more pronounced across the globe," Chief Financial Officer Charles Holley told reporters, without naming any specific markets where he sees the shift.

Wal-Mart's higher second-quarter profit narrowly beat the average estimate of analysts polled by Reuters. While the company raised its earnings outlook for the full year, that could still miss analysts' expectations.

Wal-Mart shares were down 3.4 percent at $71.91, erasing recent gains, and were the worst performer in the Dow Jones industrial average in afternoon trading.

In the United States, Wal-Mart's largest market, shoppers' top concerns are employment, gas prices and higher food costs, Holley said.

Other retailers, too, added to concerns about the plight of lower-income U.S. consumers.

Dollar Tree Inc (DLTR) forecast quarterly earnings below Wall Street estimates on Thursday. And Sears Holdings Corp (SHLD) said U.S. same-store sales fell 4.7 percent at the Kmart discount chain.

Still, Wal-Mart plans to open more stores and expects growth across its regions, but, as it has said earlier this year, will slow down store openings in Brazil, China and Mexico.

In Brazil and China, where it has hundreds of stores, it wants to "let them catch their breath" and work on moving to everyday low pricing and improving profitability, Holley said.

At the same time, the store approval process in Mexico has slowed and become more complex in the wake of allegations the company had bribed government officials to speed up approvals.

U.S. GROWTH MODERATES

Sales at Walmart U.S. stores open at least a year, or same-store sales, grew 2.2 percent in the second quarter.

While that beat analysts' average estimate of 2.1 percent, according to Thomson Reuters I/B/E/S, it was just above the midpoint of the company's 1 percent to 3 percent forecast. The pace of growth at Wal-Mart's largest unit slowed from a 2.6 percent rise in the first quarter.

"There was not as much momentum as we thought there would be," said John Tomlinson, senior hardline retail analyst at ITG Investment Research. "People thought that the business was gaining some steam instead of taking maybe a hair of a step back."

More shoppers are visiting Walmart U.S. stores, where traffic grew 0.4 percent in the second quarter, meaning roughly 80,000 additional customers visited the chain each day.

Wal-Mart said it would bring back holiday layaway in the United States this quarter. Layaway, which allows customers to keep a product on hold at the store and pay for it over time, helped boost holiday sales last year.

Walmart U.S. has been promoting its low prices with a heavy run of commercials in 25 key markets, such as a price challenge versus Supervalu Inc's Jewel-Osco stores airing in Chicago.

Such messages are critical as shoppers continue to digest lackluster economic news. The number of Americans filing new claims for jobless benefits edged higher last week, and there is the looming possibility the government will raise taxes and cut spending next year.

The Walmart U.S. discount chain has now posted four consecutive quarters of same-store sales growth after nine straight quarterly declines.

Still, those gains trailed results at some smaller competitors. Target Corp said second-quarter same-store sales rose 3.1 percent.

ADDING LESS GLOBAL SPACE

Chief Executive Mike Duke said international growth has slowed. For example, a key measure of sales at British unit Asda rose less than in the first quarter.

Wal-Mart now plans to scale back the addition of international store space this year to 21 million to 23 million square feet, instead of the 30 million to 33 million square feet it had earlier forecast.

"International has lower levels of profitability than domestic and it does take up a lot of the capital spending budget," said Edward Jones analyst Matt Arnold. "Any slowdown in spending in international I think will be viewed, long-term, as a positive."

The company continues to face government probes into allegations of bribery at its Mexican unit.

Wal-Mart said it spent about $34 million on advisers reviewing Foreign Corrupt Practices Act matters during the second quarter. It expects to incur $35 million to $40 million in related costs in both the third and fourth quarters.

Wal-Mart earned $1.18 per share in the second quarter, up from $1.09 a year earlier. Analysts, on average, expected $1.17. Consolidated net sales rose 4.5 percent to $113.53 billion.

The company now expects to earn $4.83 to $4.93 a share this year, higher than its previous target of $4.72 to $4.92. Analysts, on average, expect a profit of $4.93 a share.

Wal-Mart forecasts a third-quarter profit of $1.04 to $1.09 per share, up from 97 cents a year earlier. Analysts' average target was $1.05. The company forecast a 1 percent to 3 percent rise in Walmart U.S. same-store sales in the third quarter.

(Additional reporting by Brad Dorfman in Chicago, Dhanya Skariachan in New York, Jason Lange in Washington and Paul Sandle in London; Editing by Jeff Benkoe, John Wallace and Bernadette Baum)


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94 Comments

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Diane

It's a bit baffling to me that these stores expect to make a profit, and meanwhile the prices of everything continues to skyrocket in the midst of unemployment & salary cuts. It's not just WalMart, but WalMart always expects to increase its revenue. Perhaps they should experience losing money like a large majority of the people in the world are doing now. The gas & food prices are getting out of hand----and now we have the threat of corn going up 25% due to the droughts in the midwest, which will increase prices even more. At what point are people going to just not be able to do it anymore? Nobody is getting raises equivalent to the inflation costs. This entire country is going down the drain. Insurance companies rule the world & dictate their own prices, keep reducing payments to doctors & hospitals, keep increasing co-pays & premiums...........how are people going to be able to continue to do this? Between buying gas to be able to get to work, the cost of food to eat, paying for medical insurance so if you get sick you won't lose everything you have, utilities that perpetually increase their costs............how much can you scale down your lifestyle until there's nothing left?

August 19 2012 at 4:19 PM Report abuse +1 rate up rate down Reply
kscatko

I remember when Sam Walton introduce the Wal-Mart to America. He said Wal-Mart would sell American made items to support the country. I can't find many in his store. I'm aware of how Wal-Mart employees are paid minimum wage, hate their jobs and the store customers - due to being in the store and hearing employees loudly discussing their wages, treatment and their opinion of customers. So. I've boycotted Wal-Mart ever since. I won't miss them.

August 19 2012 at 12:22 PM Report abuse rate up rate down Reply
skylinegra

A n unhappy Walmart worker is one that doesn't know how to WORK. What are they supposed to do, pay some pimply face d high school kid $ 15 an hour?

August 17 2012 at 11:47 AM Report abuse rate up rate down Reply
mphseason

Gee, I guess that trickle down theory seems to be doing what it should. Banks are full of money, and nobody is buying anything but bare essentials. Wonder when Wal Mart grabs these repulselicans/1 % ers by the sack, and tell them to fix it. They may think they are big sharks, but WalMart is a bigger shark. Law of nature.

August 17 2012 at 11:17 AM Report abuse rate up rate down Reply
silckgsd

Walmart works against it's self by paying low wages to it's employees. They don't understand with what their employees earn, they don't have enough to pay for housing and related costs of living. If it wasn't for the super stores selling food items, they would be hurting even more.

August 17 2012 at 10:35 AM Report abuse rate up rate down Reply
1 reply to silckgsd's comment
skylinegra

I take you think Walmart can simply pay everybody more money and just absorb the cost? Yeah , right. Use your head. Not every job pays " livable " wages as most of you liberal. " non business " types believe. Nothing is preventing these people from moving up the economic ladder except for of course, " maybe they are unqualified?

August 17 2012 at 11:37 AM Report abuse rate up rate down Reply
JASON & JESS

I have stopped shopping there a long time ago. Quality is not good at all. I always tell people that when they buy clothes there to make sure it is at least one size bigger. Those Geranimal clothes always shrink. I once bought a pair of pants there that fell to pieces when I washed them. Literally. Things break and to be honest I can get the same items, better quality, if I just shop around and wait for sales.

August 17 2012 at 9:49 AM Report abuse rate up rate down Reply
Fishy

I stopped shopping at Walmart years ago. The majority of their products are Chinese garbage and I refuse to buy anything that's made in China. I've also heard firsthand, from a former employee, just how badly their workers are treated. I hope the whole corporation goes under!

August 17 2012 at 8:04 AM Report abuse rate up rate down Reply
1 reply to Fishy's comment
skylinegra

Hey pal, they can always work at McDonalds

August 17 2012 at 11:49 AM Report abuse rate up rate down Reply
1 reply to skylinegra's comment
Jan Drobiak

Could you please be polite? There's no excuse not to. These people are not impolite to you, and this is the second time you've been rude within a short number of posts

August 19 2012 at 9:41 AM Report abuse rate up rate down
wwkenwayne

I hate the say this because my family were union members, but the unions caused the companies like Wal_mart to go to china to make products at lower prices, and we americans can then afford to buy them with our paychecks.
USA made jacket,: $200.00, China made jacket: 49.95,
We caused our own problems.

August 17 2012 at 6:36 AM Report abuse rate up rate down Reply
suz

I BUY AMERICAN.....I DRIVE A CHEVY, N I RIDE AN HD...THATS RIGHT...I LIVE IN THE USA, I LIKE MY FREEDOM...I ALSO READ N KEEP UP ON THINGS...I KNOW WHATS UP....MADE IN CHINA....NOT IN THIS HOUSE... I AM SO DONE WITH THIS BOX NOW...HAVE A GREAT DAY.....

August 17 2012 at 6:15 AM Report abuse rate up rate down Reply
3 replies to suz's comment
suz

I hate to say this but foxy , do the math....china deliberatly makes cheap crap, n pons it off on us...I bet they don't let their kids play with those toys n things.... high quality?ROFLMAO...THATS A DAMN JOKE

August 17 2012 at 6:04 AM Report abuse +1 rate up rate down Reply