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
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Published on Aug 20, 2013
By Leo Sun