Wal-Mart sees profit rise but tempers outlook
As the fortunes of many Americans go, so goes Wal-Mart.
The world's largest retailer Thursday reported an 8.6 percent rise in fourth quarter profit due to a smaller tax rate, but the company offered a tempered forecast as the lower- to lower-middle income shoppers that it caters to struggle with delayed tax refunds and higher payroll taxes.
Since Wal-Mart accounts for nearly 10 percent of nonautomotive retail spending in the United States, it is a bellwether for how Americans are spending.
While the retailer's results for the fourth quarter were promising, its expectations for the future signal that many Americans are being pinched.
Wal-Mart Stores Inc., based in Bentonville, Ark., said it had a strong start to the holiday shopping season in November, but business has been volatile since December. February, in particular, has been "slower than planned," largely due to the Internal Revenue Service's decision to delay accepting tax returns by eight days until Jan. 30. That resulted in Wal-Mart customers' cashing about $1.7 billion in refunds year to date, compared with $4 billion for the same period a year ago, said Bill Simon, president of the company's U.S. namesake division.
Wal-Mart also said it has seen its business affected by the payroll tax increase. In response, the company is offering smaller packaging and less expensive products.
In the fourth quarter Wal-Mart earned $5.6 billion, or $1.67 per share, up from $5.16 billion, or $1.50 per share, a year earlier. Net sales rose 3.9 percent to $127.1 billion.
For its namesake U.S. business, Wal-Mart expects first-quarter revenue at stores open at least a year, a measure of a retailer's health, to be unchanged from a year ago.
The profit results and dividend increase helped assuage concern over first-quarter and full-year forecasts that trailed some analysts' estimates. Shares rose $1.05 per share, to close at $70.26. With Bloomberg News