Wal-Mart is spending billions of dollars to pay its hourly workers more and spruce up its stores and online services, but its fourth-quarter results show that it’ll take time to fix its business.
The world’s largest retailer’s adjusted fourth-quarter results beat Wall Street estimates. But profit fell 8 percent as the company faces higher costs.
Wal-Mart also reported a revenue shortfall for the quarter and lowered its annual sales forecast because of the negative impact of a strong U.S. dollar and the company’s move to close some stores globally. And although Wal-Mart reported its sixth straight increase in sales at established stores in the U.S., that pace marked a slowdown from the third-quarter.
Even online sales have been losing steam. During the fourth-quarter, global e-commerce rose 8 percent, well below the 20 percent pace just a few years ago.
“Overall, the results were somewhat underwhelming, and suggest the road to improvement for Wal-Mart is going be drawn out,” Michael Lasser, analyst at UBS, wrote in a report published Thursday.
Wal-Mart is making lots of changes that it says will help it stay competitive in a changing retail landscape. It’s spending $2.7 billion on higher wages and other investments for its hourly workers over a two-year period. It has also stepped up its investment online and in the stores. It’s better stocking shelves and is improving the fresh areas of its stores, which are crucial to driving traffic. And it’s expanding online grocery shopping to more than 150 locations across more than 20 markets in the U.S.
But those moves have squeezed profits. Annual profits this year are expected to fall as much as 12 percent.
The company is also pruning its global footprint. Last month, Wal-Mart announced it was closing 269 stores, including 154 in the U.S. The closings are part of the company’s overall review of its operations to make it more nimble to better compete with rivals.
Wal-Mart said revenue at stores opened at least a year for its Wal-Mart U.S. division rose 0.6 percent, its sixth straight increase, but that pace slowed from 1.5 percent increase in the third quarter. Customer counts are up for the fifth straight quarterly period.
During the year-end shopping season, Wal-Mart made a concerted effort to pull back on temporary promotions and focus on its “everyday low prices,” its bedrock price strategy.
“We are seeing momentum in our Wal-Mart U.S. business,” said Doug McMillon, president and CEO of Wal-Mart in a statement. But he added, “We’ve still got a lot of work to do.”
Wal-Mart, based in Bentonville, Arkansas, earned $4.57 billion, or $1.43 per share in the three-month period ended Jan. 31. That compares with $4.97 billion, or $1.53 per share, in the year ago period.
On an adjusted basis, the figure was $1.49, higher than the $1.46 per share estimated by FactSet.
Net revenue was $128.6 billion. That’s slightly lower than the expected $130.5 billion, according to FactSet.
The company now said it expects total sales for the year to be flat, down from its earlier forecast for three percent to four percent growth.