Wal-Mart Stores Inc. reported Thursday its first-quarter profit edged up slightly, but the company struggled with a sales slump in its namesake business. | AP Photo
NEW YORK — It was a tough quarter for Wal-Mart Stores Inc.
The world’s largest retailer reported Thursday that its first-quarter profit edged up slightly, but the company struggled with a sales slump in its namesake business.
The company, based in Bentonville, Ark., blamed a payroll tax increase, delayed tax refunds and bad weather for profit and sales results that missed Wall Street expectations.
The company also offered a profit outlook that came below analysts’ projections.
Wal-Mart is considered an economic bellwether because the retailer accounts for nearly 10 percent of nonautomotive retail spending in the U.S. The company’s latest results show that many of its low-income shoppers are struggling even as the job market and housing market are improving.
“This is a reality check for Wal-Mart’s low-income shoppers,” said Brian Sozzi, CEO and chief equities strategist at Belus Capital Advisers. “The low-income shopper is even more financially stressed than people realize.”
A big hurdle for Wal-Mart’s financially strapped shoppers has been tax changes. An increase in the payroll tax of two percentage points, which took effect Jan. 1, means that a take-home pay for a household earning $50,000 a year has been sliced by $1,000.
Wal-Mart said Thursday that it earned $3.78 billion, or $1.14 per share, in the quarter that ended April 30. That compares with $3.74 billion, or $1.09 per share, a year earlier.
Sales rose 1 percent to $113.43 billion. That figure excludes Sam’s Club membership fees.
The results fell short of Wall Street expectations for earnings of $1.15 per share on revenue of $115.78 billion.
Wal-Mart reported a 1.4 percent drop in revenue at stores open at least a year at its namesake business, which accounts for about 60 percent of its business. That was the first drop in about a year and a half. At Sam’s Club, the figure rose a slim 0.2 percent, held down by less traffic from business customers, bad weather and lower-than-expected inflation.
For the total U.S. business, revenue at stores open at least a year fell 1.2 percent, below the 0.4 percent increase that analysts had expected.
Wall Street analysts had expected its U.S. namesake business to be unchanged and were projecting a 1.2 percent rise at Sam’s Clubs.
Revenue at stores open at least a year is considered a key measurement for retailers because it excludes the effect of stores that open or close during the year.
Internationally, Wal-Mart is facing slower growth amid a global recession.
A bribery scandal also threatens to slow its business overseas. Allegations first surfaced a year ago that Wal-Mart failed to notify law enforcement that company officials authorized millions of dollars in bribes in Mexico to speed up getting building permits and gain other favors. Wal-Mart has been working with government officials in the U.S. and Mexico on that investigation. The company has been strengthening its compliance controls.
Wal-Mart has already slowed its expansion plans in Mexico, and last November it said it was looking into potential U.S. bribery law violations in Brazil, China and India.
Wal-Mart said that it expects earnings per share to be in the range of $1.22 to $1.27 in the current quarter. Analysts had expected $1.29 per share.