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Walmart cuts growth forecast as currency hampers sales

Feb 18 2016 15:27
Shannon Pettypiece

New York - Walmart Stores, the world’s largest retailer, lowered its annual sales forecast after the strong dollar pulled down the value of overseas revenue.

The company now expects net sales growth to be flat this year, compared with a previous forecast for growth as high as 4%, according to a statement Thursday.

The outlook signal that Walmart still faces hurdles in bouncing back from several years of slumping growth. Its US same-store sales increase also was slow last quarter, rising just 0.6%. That fell short of the 1% analysts had predicted.

Excluding some items, earnings were $1.49 a share in the fourth quarter, the Bentonville, Arkansas-based company said. Analysts had predicted $1.46 on average, according to data compiled by Bloomberg. Fourth-quarter revenue fell 1.5% to $129.7bn, also hurt by currency effects. Analysts had predicted $130.6bn.

The currency headwinds could hamper a rally for Walmart after a dismal 2015. The stock fell 29% last year but has shown signs of rebounding in 2016, gaining 7.8% despite a tumbling market. Investors view the discount retailer as a safe haven if the US economy enters a recession. It may also gain from rising wages, particularly among lower-income consumers, and persistently low gas prices.

Slow sales

Walmart’s profit has been hurt by slowing US sales, as well as increasing spending on employee pay and its online operations. Wal-Mart will pay $1.5bn in higher wages in the fiscal year ending January 2017 as it raises its minimum wage to $10 an hour and gives a one-time raise to more than 1 million employees this month. Those added wages will contribute to profit falling between 6% and 12% this year, the company has said.

Walmart said last month that it will close 269 stores worldwide, including all of its small-format express stores.

Walmart has been focused on fixing up its 4 600 US stores after years of customer complaints about out-of-stock items, poor customer service and long waits at the checkout line. The company has raised pay in an effort to attract and retain better workers, implemented a new system to stock its shelves, and increased staff at the register.

So far, the company says the efforts are working. Last February, only 16% of its US locations met the company’s new standards for cleanliness and customer service. That number had reached more than 70% as of November.

walmart  |  growth forecast  |  retail


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