Sluggish sales at Walmart, profit outlook lowered

BENTONVILLE, Ark. — Bad weather and a reduction in food stamps led to weaker-than-expected sales at Walmart and Sam’s Club, which — combined with greater than expected international expense — prompted an uncharacteristic preannouncement from the company that fourth quarter profits would be worse than expected.

Walmart said its earnings per share adjusted to exclude several non-recurring and greater than expected expenses related to international operations would be below the low end of a previously provided forecast of $1.60 to $1.70 and full year earnings per share would be below earlier guidance in the range of $5.11 to $5.21.

The earnings miss for the quarterly period ended January 31 was attributed to a number of factors. In the U.S., same store sales at Walmart stores and Sam's Club’ are both expected to be slightly negative, according to Walmart CFO Charles Holley, compared to earlier guidance which called for comps at Walmart to be roughly flat and comps at Sam’s in the range of flat to up 2%.

“Despite a holiday season that delivered positive comps, two factors contributed to lower comp sales performance for the 14 week period for Walmart U.S.,” Holley said. “First, the sales impact from the reduction in SNAP (the U.S. government Supplemental Nutrition Assistance Program) benefits that went into effect November 1 is greater than we expected. And, second, eight named winter storms resulted in store closures that impacted traffic throughout the quarter. Sam’s Club was also impacted by the weather throughout the quarter.”

The preannouncement by Walmart is unfamiliar territory for a company accustomed to meeting or exceeding its forecasts. It also marks an inauspicious beginning to a new leadership era at the world’s largest retailer. Walmart International president and CEO Doug McMillon assumes the role of president and CEO of Wal-Mart Stores, Inc., on February 1 when current president and CEO Mike Duke steps down.

Walmart is scheduled to report fourth quarter results on February 20.
 

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