Wal-Mart Beats 4Q Profit Forecasts

Wal-Mart Stores Inc. reported a 12 percent increase in profit for the fourth quarter, as sales for the critical year-end shopping season perked up amid lower gas prices and an improving economy.

The world’s largest retailer also announced that it was spending more than $1 billion this year on a package of initiatives that will increase pay and enhance training for its 1.3 million U.S. workers. That includes a pay raise for 40 percent of its U.S. workers, about 500,000 people, in the next six months.

As part of the changes, the company is increasing its starting pay to at least $9 an hour in April, and $10 an hour by early February of next year. But the company said those moves would hurt profits in the short run as it offered a profit outlook below analysts’ expectations.

Shares of Wal-Mart fell more than 3 percent on the reduced profit outlook.

Still, Wal-Mart’s results during the year-end quarter were an improvement after the Bentonville, Arkansas-based company has struggled with two years of either declining sales or no growth for a key sales figure.

Sales at stores open at least a year, considered a key indicator of a retailer’s health, rose 1.5 percent at Wal-Mart stores, which make up 60 percent of the company’s sales. That’s a big jump from the 0.5 percent increase that it had in the previous quarter. The year-end quarter marked the first positive quarter since the third quarter of fiscal 2013.

“Clearly, our sales benefited from customers having more spending power due to lower gas prices in most of our large markets,” said CEO Doug McMillon, according to a transcript of a conference call.

Wal-Mart is a barometer of consumer spending, and its challenges reflect the struggles of its low-income shoppers, who are being squeezed by stagnant wages and reduced government food stamps. But lower gas prices and an improving job picture appear to be finally making low-income shoppers spend a little more.

“We have work to do to grow the business,” McMillon said in a statement. “We know what customers want from a shopping experience, and we’re investing strategically to exceed their expectations and better position Wal-Mart for the future.”

In an interview earlier this week with The Associated Press, McMillon said that the company hopes that by investing more in its workers, it will provide a better customer experience and shoppers will spend more.

The company reported fourth-quarter earnings of $4.97 billion, or $1.53 per share, in the quarter ended Jan. 31. That compares with $4.43 billion, or $1.36 per share, a year earlier.

Earnings, adjusted for nonrecurring costs, were $1.61 per share. The results beat Wall Street expectations. The average estimate of analysts surveyed by Zacks Investment Research was for earnings of $1.54 per share.

Revenue for the period was $131.57 billion, up 1.4 percent from a year earlier. That missed Wall Street forecasts. Analysts expected $132.32 billion, according to Zacks.

By division, Wal-Mart’s U.S. business saw total sales rise 4.1 percent to $79.5 billion in the quarter, while the Sam’s Club division had a 1.3 percent increase to $14.8 billion.

Wal-Mart’s international business saw a 3.9 percent increase to $36.2 billion.

Wal-Mart expects full-year earnings to be $4.70 to $5.05 per share. That’s below the $5.20 per share analysts had expected, according to FactSet.

The company said that it expects earnings per share to be between 95 cents and $1.10 for the current quarter. Analysts had expected $1.14 per share.

On Thursday, Wal-Mart shares fell 2.77, or 3.2 percent, to $83.52.

This article appeared in print in the February 20th, 2015 edition of Hamodia.