As the fortunes of many Americans go, so goes Walmart.
The world’s largest retailer on Thursday reported an 8.6 percent rise in fourth-quarter profit due to a smaller tax rate, but the company offered a tempered forecast as the lower- to lower-middle income shoppers that it caters to struggle with delayed tax refunds and higher payroll taxes.
Walmart is among several companies from fast food chain Burger King to jewelry retailer Zale warning that shoppers are being hurt by smaller paychecks and delayed income refunds. But since Walmart is an industry behemoth that accounts for nearly 10 percent of non-automotive retail spending in the U.S., it is seen as a bellwether for how Americans are spending.
“Walmart moms are the barometer of the U.S. household,” said Brian Sozzi, chief equities analyst at NBG Productions who follows Walmart. “Right now, they’re afraid of higher taxes and inflation.”
Walmart, based in Bentonville, Ark., said while it had a strong start to the winter holiday shopping season in November, business has been volatile since December. The retailer said February, in particular, has been “slower than planned,” largely due to the Internal Revenue Service’s decision to delay accepting tax returns by eight days until Jan. 30 because the government didn’t reach an agreement on the U.S. budget until late last year.
That resulted in Walmart customers cashing about $1.7 billion in income tax refunds year to date, compared with $4 billion for the same period a year ago, said Bill Simon, president of the company’s U.S. namesake division. Simon said last year, shoppers used their refund money to buy TVs ahead of the Super Bowl, but this year, the retailer isn’t sure how customers will use the additional money.
In the fourth quarter, Walmart earned $5.6 billion, or $1.67 per share, up from $5.16 billion, or $1.50 per share, a year earlier. Results were helped by a lower tax rate, which was 27.7 percent, compared with the rate of 30.9 percent a year ago. Net sales rose 3.9 percent to $127.1 billion.
Earnings topped Wall Street estimates of $1.57 per share, but sales fell short of the $127.8 billion analysts were expecting.
During the current quarter, Walmart says it expects earnings to range from $1.11 to $1.16 per share, below the $1.18 per share analysts polled by research firm FactSet are expecting.
Walmart says its guidance includes about $40 million to $45 million in first-quarter costs related to matters involving the Foreign Corrupt Practices Act and compliance issues.
For the year, Walmart expects earnings of between $5.20 and $5.40 per share, while analysts expect $5.38 per share.