Published: May 16, 2013
NEW YORK - The first few months of the year were tough for Wal-Mart Stores Inc.
The world's largest retailer reported Thursday that its first-quarter profit edged up just slightly as the company struggled with a sales slump in its namesake business during the three-month period. The discounter also offered a quarterly profit outlook that came below Wall Street's projections.
Wal-Mart blamed a litany of factors affecting its budget-conscious customers, including a payroll tax increase, delayed tax refunds, job worries and bad weather. It is the latest in a string of big-name, consumer companies from McDonald's to Macy's to cite such hurdles in the first quarter of the year.
"Frankly, we had a more difficult quarter than expected," said Wal-Mart's President and CEO Mike Duke in a pre-recorded call.
Wal-Mart is considered an economic bellwether because the retailer accounts for nearly 10 percent of nonautomotive retail spending in the U.S. The latest results indicate that many American households with lower incomes continue to struggle even as the job and housing markets improve.
"This is a reality check for Wal-Mart's low-income shoppers," said Brian Sozzi, CEO and chief equities strategist at Belus Capital Advisers. "The low-income shopper is even more financially stressed than people realize."
While the company said lingering cool weather into April was a culprit in a sales shortfall for seasonal goods like spring fashions and sporting goods such as camping gear, Charles Holley, Wal-Mart's chief financial officer, told reporters on a conference call that economic worries loom large.
"Our customers tell us that jobs and employment are high on the list of concerns," he said.
Additionally, like many companies, Wal-Mart said that business during the first quarter was hurt by the government's delay in processing income taxes and paying refunds. Wal-Mart said it cashed less in income tax refunds than a year ago.
Another big hurdle for Wal-Mart's financially strapped shoppers have been tax changes, which executives said started having more of an impact as the first quarter progressed. An increase in the payroll tax of two percentage points, which took effect Jan. 1, means that a take-home pay for a household earning $50,000 a year has been sliced by $1,000.
Such factors all helped to depress results. Wal-Mart earned $3.78 billion, or $1.14 per share, in the quarter that ended April 30. That compares with $3.74 billion, or $1.09 per share, a year earlier. Revenue rose 1 percent to $113.43 billion. Wal-Mart reported a 1.4 percent drop in revenue at stores open at least a year at its namesake business, which accounts for about 60 percent of the company's total revenue. That was the first drop since the second quarter of 2011.