Business

Wal-Mart lowers forecast as currency hampers overseas sales

In this Thursday, Sept. 19, 2013, file photo, reusable shopping bags are offered for sale at a Wal-Mart Neighborhood Market, in the Chinatown district of Los Angeles.
In this Thursday, Sept. 19, 2013, file photo, reusable shopping bags are offered for sale at a Wal-Mart Neighborhood Market, in the Chinatown district of Los Angeles. AP

Wal-Mart Stores Inc. lowered its annual sales forecast after the strong dollar pulled down the value of overseas revenue, bringing another hurdle to a company trying to bounce back from a U.S. slowdown.

Wal-Mart now expects net sales growth to be “relatively flat” this year, compared with a previous forecast for an increase of as much as 4 percent, according to a statement Thursday. The company blamed the dollar’s gains for the change – the previous forecast didn’t account for currency changes – as well as a push to close underperforming stores.

The outlook signals that Wal-Mart still faces hurdles in recovering from several years of slumping growth. Its U.S. same-store sales increase also was slow last quarter, rising just 0.6 percent. That fell short of the 1 percent analysts had predicted. Though traffic to Wal-Mart stores is climbing modestly, customers are spending less money on their visits.

Wal-Mart is the No. 1 grocery store in the Charlotte region by market share. The retailer has been expanding its Neighborhood Market concept – its version of a traditional grocery store – rapidly throughout the region, heating up grocery competition.

The company reported that fourth-quarter profit was better than expected, helped by efforts to keep a lid on expenses. Excluding some items, earnings were $1.49 a share in the period. Analysts had predicted $1.46 on average, according to data compiled by Bloomberg. Fourth-quarter revenue fell 1.4 percent to $129.7 billion, also hurt by currency effects. Analysts had predicted $130.6 billion.

Sales online growth slowed to 8 percent, despite increased spending by the company on its web operations.

The currency headwinds could hamper a rally for Wal-Mart after a dismal 2015. The stock fell 29 percent last year but has shown signs of rebounding in 2016, gaining 7.8 percent despite a tumbling market. Investors view the discount retailer as a safe haven if the U.S. economy enters a recession. It may also gain from rising wages, particularly among lower-income consumers, and persistently low gas prices.

Slow Sales

Wal-Mart’s profit has been hurt by slowing U.S. sales, as well as increasing spending on employee pay and its online operations. Wal-Mart will pay $1.5 billion in higher wages in the fiscal year ending January 2017 as it raises its minimum wage to $10 an hour and gives a one-time raise to more than 1 million employees this month.

Those added wages will contribute to profit falling between 6 percent and 12 percent this year, the company has said.

Wal-Mart said last month that it will close 269 stores worldwide, including its small-format Express chain. The move affects 17 stores in North Carolina, including one Express store in Richfield, which is about 45 miles northeast of Charlotte.

Wal-Mart has been focused on fixing up its 4,600 U.S. stores after years of customer complaints about out-of-stock items, poor customer service and long waits at the checkout line. The company has raised pay in an effort to attract and retain better workers, implemented a new system to stock its shelves, and increased staff at the register.

So far, the company says the efforts are working. Last February, only 16 percent of its U.S. locations met the company’s new standards for cleanliness and customer service. That number had reached more than 70 percent as of November. The Observer contributed.

  Comments