- POSTED: 16 May 2014 01:27
Wal-Mart Stores on Thursday blamed disappointing first-quarter earnings on unusually severe winter weather that depressed store traffic and forced the company to spend millions more on snow-removal and heating.
NEW YORK: Wal-Mart Stores on Thursday blamed disappointing first-quarter earnings on unusually severe winter weather that depressed store traffic and forced the company to spend millions more on snow-removal and heating.
The world's biggest retailer notched earnings of US$3.6 billion for the January-March quarter, down five per cent from the year-ago level.
The company cited some familiar factors behind the decline, including reduced food-stamps benefits that again pinched low-income shoppers and higher health care costs.
But executives highlighted the effects of the frigid weather, which has also been cited by the Federal Reserve as a drag on the US economy in the first quarter.
"Like other retailers in the United States, the unseasonably cold and disruptive weather negatively impacted US sales and drove operating expenses higher than expected," said Wal-Mart chief executive Doug McMillon.
Weather-related costs for snow removal and higher utility bills dragged profits lower by US$120 million, said Bill Simon, president of Walmart US.
The company also was forced to pay additional transportation costs and overtime to "keep our stores well stocked" following weather-induced delivery problems, Simon said.
Hard freezes also depressed citrus supply, although this effect was partially offset by strong strawberry and watermelon crops, said Sam's Club president Rosalind Brewer.
Comparable-store sales in the US from its namesake Walmart stores and Sam's Club membership warehouses declined 0.2 per cent from the year-ago period.
Walmart US and Sam's Club account for more than 70 per cent of Wal-Mart Stores's revenues, with the remainder coming from the foreign segment.
But Wal-Mart's results and outlook lagged expectations. Profits translated into US$1.10 per share, five cents shy of expectations.
Revenues rose 7.5 per cent to US$115 billion, below the US$116.3 billion forecast by analysts.
The company projected that second-quarter earnings per share would be between US$1.15 and US$1.25. Analysts had forecast US$1.28.
Wal-Mart chief financial officer Charles Holley said the company's outlook includes extra spending to build its e-commerce business, where the company is also in the market for "strategic acquisitions" to boost technology and talent.
The company is also pressing ahead with a rollout of smaller stores. The company has also unveiled a money-transfer service, introduced its Wild Oats line of organic food and launched a video game trade-in program.
"We believe we're headed in the right direction," McMillon said. "The team is diligently focused on improving sales by introducing increased innovation across the box."
Wal-Mart shares fell 2.2 per cent to US$76.97 in late-morning trade, making it the worst-performing component in an overall lower Dow that was down almost one per cent.