Currency shifts pay raises put pressure on WalMart profit as revenue declines

Posted On Oct 3 2019 by

BENTONVILLE, Ark. – Wal-Mart Stores Inc. reported sluggish sales and a seven per cent drop in first-quarter profit as worker pay raises, spending on e-commerce and currency fluctuations put pressure on the bottom line at the world’s largest retailer.The company also reported a 1.1 per cent increase for a key sales measure at its U.S. Wal-Mart stores, its third consecutive quarter of increases. However, that growth came below analysts’ expectations.By comparison, Wal-Mart’s Canadian stores performed well with revenue up 3.7 per cent and comparable-store growth of 1.8 per cent, thanks partly to improvements at its food business and strong performance in seasonal items.The company has one fewer rival to contend with since Target closed all its Canadian stores in recent weeks but continues to face stiff opposition from Canada’s domestic retail chains, particularly in the grocery business.Walmart Canada said May 8 that it plans to spend about $350 million to acquire and renovate 13 former Target Canada stores and a distribution centre to add to its own retail network.Overall, Wal-Mart’s profit and total sales missed Wall Street estimates. The weakness adds to questions about the health of consumer spending. The latest government retail sales figures showed spending was flat in April, and Macy’s, Kohl’s and J.C. Penney announced disappointing results despite low gas prices and improvements in the job market.The retail industry also is battling temporary issues, such as the labour dispute at West Coast ports that delayed shipments of merchandise.Wal-Mart itself is a barometer of consumer spending. Its challenges reflect the struggles of its low-income shoppers, who are being squeezed by stagnant wages and higher living costs. Wal-Mart pointed out that its customers were either pocketing tax refunds and their savings from lower gas prices, or using them to pay pay down debt or bills like utilities.Wal-Mart also is facing fierce competition from the likes of online king, dollar stores and grocers. It’s also dealing with a shift among shoppers seeking the convenience of small stores or buying on their mobile devices and PCs.In response, Wal-Mart is rapidly opening smaller stores. It is also 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 announced last week it was testing an unlimited free-shipping service for $50 a year, undercutting Amazon’s popular Amazon Prime, whose annual dues are $99.In Wal-Mart’s U.S. division, the company is trying to improve it selection and customer service, while making sure it has the lowest prices. Wal-Mart is also aiming to improve the freshness of its produce.The company expects to see improved results by the holiday season, according to Greg Foran, who had been president and CEO of Wal-Mart Asia and took over Wal-Mart’s U.S. business last summer.As part of the strategy, the company raised the minimum wages for its hourly workers to $9 per hour in April. By February 2016, all hourly workers will make at least $10 per hour.That comes at a cost. It’s part of a $1 billion investment in its workforce that also includes improved training.Wal-Mart is hoping that by investing in its people, Wal-Mart will improve customer service, resulting in higher sales.“We’re not interested in reaching our goals, but reaching them in a way which is sustainable for the long term,” Foran said. “This requires a steady execution, a pace that is fast but calculated, and one that allows us to get it right.”But such investments are squeezing profits in the short term.Wal-Mart said that net income was $3.34 billion, or $1.03 per share, for the three months that ended April 30. That compares with $3.59 billion, or $1.11 per share, a year earlier.Net revenue was down slightly to $114.0 billion, from $114.2 billion in the year-ago quarter.Analysts were expecting $1.04 per share and revenue of $116.27 billion, according to Zacks Investment Research._____Elements of this story were generated by Automated Insights ( using data from Zacks Investment Research. Access a Zacks stock report on WMT at— with a file from The Canadian Press Currency shifts, pay raises put pressure on Wal-Mart profit as revenue declines FILE – In this June 5, 2014 file photo, Rick Patanella, right, offers bacon samples to Karla and Gary Owens at Sam’s Club in Bentonville, Ark. Wal-Mart Stores Inc. reports quarterly financial results before the market opens Tuesday, May 19, 2015. (AP Photo/Sarah Bentham, File) by The Associated Press Posted May 19, 2015 9:05 am MDT Last Updated May 19, 2015 at 12:10 pm MDT AddThis Sharing ButtonsShare to TwitterTwitterShare to FacebookFacebookShare to RedditRedditShare to 電子郵件Email read more