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Customers walk outside a Walmart store in the Porter Ranch section of Los Angele

Wal-Mart sales growth weakest in 5 years, outlook disappoints

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Wal-Mart sales growth weakest in 5 years, outlook disappoints
Brainerd MN 506 James St. / PO Box 974 56401

May 15 (Reuters) - Wal-Mart Stores Inc forecast a profit for the current quarter that fell short of analyst expectations after quarterly sales grew at their slowest pace in nearly five years.

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The company, whose shares were down 2.5 percent in afternoon trading, said the forecast mainly reflected higher costs for employee healthcare and the need to keep prices low as customers struggle with a sharp cut in food stamp benefits.

One in five of Wal-Mart's customers relies on government food stamps, which can be used instead of cash to buy groceries.

The company's low and middle income consumers are still "very cautious" about spending, Bill Simon, Wal-Mart's head of U.S. operations, said on a call.

Even dollar stores have been hurt by a slowdown in spending by low and middle income consumers.

Family Dollar Stores Inc said in April it would cut jobs and shut hundreds of stores after second-quarter comparable sales fell 3.8 percent.

Wal-Mart's healthcare costs are also surging as thousands of employees sign up for benefits. The company, which has more than 2 million employees, said healthcare costs were expected to be $300 million this year.

The company did not release healthcare costs for last year.

The weak outlook also reflects increased investment in its Sam's Club stores and the e-commerce business.

Wal-Mart said it expects second-quarter earnings of $1.15-$1.25 per share from continuing operations, missing the average analyst estimate of $1.28 per share.

First-quarter profit fell 5 percent to $3.59 billion.

Wal-Mart, like other retailers, blamed its weak sales on a harsher-than-usual winter in much of the United States.

The winter storms not only made it difficult for shoppers to visit Wal-Mart's stores, mainly located on the outskirts of towns and cities, but also disrupted the company's supply chain.

Wal-Mart, which operates in 10 countries, said its tax rate was also higher than expected at about 34 percent. The company did not say why the tax rate, which was 32.9 percent for the year ended Jan. 31, 2014, was higher than anticipated.

The top U.S. corporate tax rate is 35 percent but many companies pay much less than this.

Wal-Mart's U.S. same-store sales were relatively flat. The company earned $1.10 per share from continuing operations, missing the average analyst estimate of $1.15 per share, according to Thomson Reuters I/B/E/S.

The company said the severe winter impacted earnings per share by about 3 cents.

E-commerce sales rose 27 percent.

Total revenue rose 0.8 percent to $114.96 billion, with currency fluctuations hurting net sales by about $1.6 billion.

Wal-Mart's revenue growth has not dropped below 1 percent since the second quarter of fiscal 2010, when it reported a decline of 1.4 percent.

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Denton (Denny) Newman Jr.
I've worked at the Brainerd Dispatch with various duties since Dec. 7, 1983. Starting off as an Ad Designer and currently Director of Audience Development. The Dispatch has been an interesting and challenging place to work. I'm fortunate to have made many friends, both co-workers and customers.
(218) 855-5889
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