BENTONVILLE, Ark. - Walmart Stores (WMT) cut its annual earnings outlook Tuesday because of currency fluctuations, while higher wages and investments in overhauling its stores are squeezing its profits.
The world's largest retailer also reported an 11.4 percent drop in second-quarter profit, though an important sales measure rose for the fourth straight quarter. Revenue at U.S. Walmart stores opened at least a year rose 1.5 percent. In particular, the measure at its small format stores called Neighborhood Markets was up 7.3 percent.
Walmart is facing challenges on all fronts, obstacles that have resulted in its shares falling 16 percent this year. Its low-income shoppers are still struggling in an economy that is slowly recovering. The company is also facing increasing competition from the likes of online king Amazon (AMZN) and dollar stores.
Walmart has been doing a number of things to improve its results. It's increasing its spending for its online operations to between $1.2 billion and $1.5 billion this year, up from $1 billion last year. It's opening a string of fulfillment centers dedicated to e-commerce that should speed up delivery and put more items in one box. And it's testing an unlimited free-shipping service for $50 a year, undercutting Amazon's popular Amazon Prime, whose annual dues are $99.
Walmart's U.S. division, which accounts for 60 percent of its total sales, is undergoing a major overhaul under new U.S. CEO Greg Foran. The company is trying to improve pricing and selection as well as beef up customer service. It promises tidier stores and an improved holiday shopping season. Earlier this year, it announced wage increases for hourly workers.
The company, based in Bentonville, Ark, earned $3.63 billion, or $1.08 per share, in the quarter ended July 31. That compares with $4.09 billion, or $1.26 per share, a year ago.
The results did not meet Wall Street expectations. The average estimate of 13 analysts surveyed by Zacks Investment Research was for earnings of $1.12 per share. The world's largest retailer posted revenue of $120.23 billion in the period, beating Street forecasts. Eleven analysts surveyed by Zacks expected $120.06 billion.
Wal-Mart now expects full-year earnings to be $4.40 to $4.70 per share.
The company said that is now expects online sales overseas to be up in the mid- to high teens for the current fiscal year because of slowing economies. That compares with the original forecast for growth by a percentage in the mid-20s. The company posted a 16 percent increase in global e-commerce in the second quarter.
Shares slipped $1.94 cents, or 2.8 percent, to $69.90 in premarket trading.