Wal-Mart Stores Inc. on Thursday reported a 5.7 percent increase in second-quarter net income and raised its outlook for the full year.
But Wal-Mart is seeing its momentum slow down amid a tough economic climate here and abroad. Its total revenue came in short of Wall Street estimates, and the discounter is delaying store expansion plans in Mexico, its largest international division, as it deals with bribery charges there. It’s also scaling back store growth plans in China and Brazil to boost profitability in those operations.
Wal-Mart is considered an economic bellwether because the retailer accounts for nearly 10 percent of nonautomotive retail spending in the U.S. The company, based in Bentonville, Ark., said its customers are still being squeezed by economic problems in the U.S. and abroad.
“I don’t think the economy is helping us,” Charles Holley, Wal-Mart’s chief financial officer, told reporters during a conference call. “Our customer is still very concerned about employment.”
Still, Wal-Mart’s results offer optimism that the company’s namesake U.S. business has turned a corner. Wal-Mart, which thrived during the U.S. recession as more well-off people started shopping at its stores here, had begun to struggle as the retailer’s core low-income customers were hit hard by joblessness and other challenges in a slow economic recovery.
Adding to that, Wal-Mart’s U.S. stores, which account for 60 percent of the company’s revenue, had turned off shoppers by veering away from its “everyday low prices” strategy and focusing more on temporarily slashing prices on select items. It also got rid of popular merchandise in an effort to de-clutter the stores.
Wal-Mart last year began adding back 10,000 products and refocused on prices, backing the strategy with TV campaigns. Revenue at Wal-Mart’s U.S. division rose 3.8 percent to $67.35 billion in the latest quarter.
Revenue at stores open at least a year rose 2.2 percent in the division, excluding fuel. The figure, which was slightly above the 2.1 percent Wall Street estimate, marks the fourth consecutive quarterly gain for the division after it experienced nine straight quarters of declines. However, the pace was slower than the 2.6 percent gain in the company’s first quarter.
Overall, Wal-Mart reported net income of $4.02 billion, or $1.19 per share, for the quarter ended July 31. That compares with $3.80 billion, or $1.09 per share, a year ago. Revenue excluding membership fees at Sam’s Club rose 4.5 percent to $113.53 billion. Analysts forecast $1.17 per share on revenue of $114.63 billion.
It expects third-quarter net income between $1.04 per share and $1.09 per share. Analysts had expected $1.05. For the full year, it now forecasts earnings per share to be in the range of $4.83 to $4.93.
That is up from Wal-Mart’s original forecast of $4.72 to $4.92 per share. Analysts forecast $4.93.
Customer traffic increased for the third straight quarter. The 0.4 percent increase translated to serving another 80,000 additional customers every day during the latest quarter, the company said. It still trailed the 1.1 percent pace in the previous period.
For the overall U.S. business, revenue at stores opened at least a year rose 2.5 percent, including a 4.7 percent increase at the company’s Sam’s Club warehouses.
