Wal-Mart cuts outlook as earnings drop; Asda's second-quarter sales slump
Wal-Mart Stores cut its full-year earnings guidance on Tuesday, as the company took a hit from increased wages and currency exchange fluctuations.
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The company now expects its fiscal 2016 earnings per share to range between $4.40 and $4.70 compared with a previous estimate of $4.70 to $5.05.
For the third quarter, Wal-Mart expects earnings per share of 93 cents to $1.05.
The company reported second-quarter earnings per share of $1.08, down from $1.21 a year earlier, while revenue nudged up to $120.2bn from $120.13bn.
Wal-Mart said the impact from investments in wages, training and additional hours in its stores and clubs will be approximately $0.24, including around $0.08 in the third quarter. The company said the decision to add associate store hours beyond its February plan was the primary driver.
It also pointed to headwinds from “ongoing shrink”, which refers to theft by shoppers and employees.
It wasn’t all bad news, however, with sales at stores open more than a year up 1.5% from 2014 in the 13 weeks ended 31 July, beating consensus expectations for a 1% increase.
President and chief executive officer Doug McMillon said: “Even if it's not as fast as we would like, the fundamentals of serving our customers are consistently improving, and it's reflected in our comps and revenue growth.
“In this case, our desired changes require investments, which are pressuring earnings this year. We're confident that our strategic plan will create robust sustainable growth for shareholder returns over time.”
Meanwhile, sales at Wal-Mart’s UK supermarket chain, Asda, were down 4.7% in the second quarter, while profits were flat as it struggled to compete with discount retailers.
Still, chief executive Andy Clarke said the company will stick to the five-year plan which involves slashing jobs and prices in order to compete with the likes of Aldi and Lidl.
"We've hit our nadir. Every business has got to have one and this is ours that we're declaring today,” said Clarke.
At 1436 BST, Wal-Mart shares were down 2.6% at $70.02.