Wal-Mart Cuts Forecast as it Spends More on Healthcare, Online

Thursday, 14 Aug 2014 07:57 AM

 

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Wal-Mart Stores Inc. cut its full-year profit forecast, citing higher employee healthcare costs and increased investment in its online business.

The world's largest retailer, which has 1.4 million employees in the United States, raised its estimate for U.S. healthcare costs this year to $500 million from $330 million.

U.S. healthcare costs rose in the second quarter due to increased enrollments and medical cost inflation, Wal-Mart said.

As expected, the retailer also reported flat U.S. same-store sales, excluding fuel, for the second quarter — the sixth quarter of declining or no growth.

Chief Executive Doug McMillon blamed intense competition and weak consumer spending for sluggish U.S. same-store sales.

U.S. retail sales in July were the weakest since January, data showed on Wednesday.
Department store operator Kohl's Corp., which also reported results on Thursday, said its quarterly same-store sales fell 1.3 percent.

Wal-Mart is playing catch-up in online retailing, which is dominated by Amazon.com Inc., as shoppers increasingly turn to the Web to buy everyday items.

Wal-Mart named a new head for its online business in June, as part of its aggressive plans to integrate the business with its network of brick-and-mortar stores.

The company's revenue rose by a better-than-expected 2.8 percent in the second quarter, helped by higher sales at its smaller-format stores.

"We're encouraged by the performance of our small-format stores and e-commerce, areas where we're investing significantly this year. But we wanted to see stronger comps overall in Walmart U.S..." McMillon said in a statement.

The company cut its forecast for earnings from continuing operations for the year ending Jan. 31 to $4.90-$5.15 per share from $5.10-$5.45.

Wal-Mart shares were little changed at $73.90 before the bell on Thursday.

Net income attributable to the company rose to $4.09 billion, or $1.26 per share, in the quarter ended July 31 from $4.07 billion, or $1.24 per share, a year earlier.

Wal-Mart reported earnings of $1.21 per share from continuing operations attributable to the company, matching the average analyst estimate, according to Thomson Reuters I/B/E/S.

Total revenue rose to $120.13 billion from $116.83 billion, a year earlier.

Up to Wednesday's close, Wal-Mart shares had fallen about 6 percent this year.

© 2014 Thomson/Reuters. All rights reserved.

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