Wal-Mart's (WMT) Second Quarter Earnings Sink the Markets

Retail giant Wal-Mart (WMT) sank the markets last week, after the company reported disappointing second quarter earnings. The company earned $1.24 per share, or $4.07 billion, up from $1.18 per share, or $4.02 billion in the prior year quarter. Excluding one-time items, earnings came in at $1.25 per share, matching analyst estimates. Revenue came in at $116.9 billion, falling short of the consensus estimate of $118.09 billion.

Same-store sales slid 0.3%. Daily Chart
Wal-Mart also lowered its full year sales growth forecast to 2% to 3% for the full year, down from its previous guidance for a 5% to 6% year-on-year increase. The company also reduced its earnings outlook from a range between to $5.20 to $5.40 to a range between $5.10 to $5.30 per share. Wal-Mart's bleak earnings and guidance were echoed across the retail sector by Macy's (M) and Nordstrom (JWN), which reported similarly disappointing results last week. Wal-Mart blamed the lingering effects of the payroll tax for an overall slowdown in consumer spending. Wal-Mart also blamed higher gasoline and grocery prices, as well as delayed tax refunds for the slowdown. However, the company did not acknowledge its most challenging competitor: e-commerce. Over the past decade, e-commerce giant Amazon (AMZN) has backed big box retailers and superstores into a corner with free shipping options and same-day delivery being tested in certain areas across America. Although the housing and job markets have been improving in the United States, the cost of living remains high and middle class consumers have very little discretionary income to work with, which has hit retailers across the market. CEO Mike Duke acknowledged these challenges, stating, "The retail environment remains challenging in the U.S. and our international markets, as customers are cautious in their spending." However, Duke remained more upbeat about the rest of the year. "I'm encouraged by our position to execute in the second half of the year, particularly with the steps we're taking to improve performance," he stated. Economists are increasingly concerned about consumer spending, since it accounts for nearly two thirds of the country's GDP. In addition, uncertainty in the macro growth of Europe and China have investors concerned about an upcoming global slowdown. Wal-Mart is considered a major bellwether in U.S. retail. Shares of Wal-Mart don't appear too expensive, at 12.8 times forward earnings, but its 5-year PEG ratio of 1.55 hints at slower growth ahead. The stock pays a quarterly dividend of $0.47 per share, a 2.5% yield at current prices, and has risen 3% over the past twelve months. Other News About WMT Wal-Mart Estimates Cut at Two Firms Wal-Mart ratings get slashed. Walmart Cuts Sales Forecast as Consumers Rein in Spending Wal-Mart's slashed forecasts spook investors. Other Stocks in the News Is This New Lung Cancer Treatment a Game Changer? Could this new lung cancer treatment be a blockbuster? A Closer Look at 3 Players in Diabetes Treatments Should investors keep an eye on these three biotechs? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Aug 20, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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