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Rollbacks in Wal-Mart's profit

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Wal-Mart, whose stores go by a different spelling, was hit hard by severe weather and customers unwilling to spend.

DANIEL ACKER / BLOOMBERG NEWS FILES Enlarge Image

Wal-Mart, whose stores go by a different spelling, was hit hard by severe weather and customers unwilling to spend.

NEW YORK -- Much like its low-income shoppers, Wal-Mart can't seem to catch a break as the U.S. economy rebounds.

The world's largest retailer on Thursday posted a 21 per cent drop in fourth-quarter profit and gave a subdued forecast for the current year as it continues to be weighed down by a number of factors.

Winter has been marked by severe weather and slow spending over the holidays. Growing competition from dollar stores and grocers also has chipped away sales. And the latest headache? Wal-Mart Stores Inc. said the Nov. 1 expiration of a temporary boost in food stamps is hurting its shoppers' ability to spend.

The issues Wal-Mart faces are big challenges for Doug McMillon, who took over as CEO Feb. 1. In a pre-recorded call on Thursday, McMillon promised Wal-Mart will sharpen its focus on everyday low prices at U.S. stores and further push that strategy abroad.

Wal-Mart also said it will speed up growth plans for its Neighborhood Markets and Walmart Express smaller stores that cater to shoppers looking for more convenience with fresh produce, meat and household and beauty products.

It now plans to open 270 to 300 small stores during the current fiscal year -- double its initial forecast -- adding to the 346 Neighborhood Markets and 20 Walmart Express locations it already has. The expansion of smaller stores now outpaces the growth of its supercentres, which had long been the company's growth engine.

"Customers' shopping habits are changing more rapidly than ever before," McMillon said. "We must be more nimble and flexible."

Wal-Mart's results give insight into shopper behaviour during the U.S. economic recovery. It's considered an economic bellwether because it accounts for nearly 10 per cent of non-automotive retail spending in the U.S. Wal-Mart, like other retailers, warned in late January its profit and sales were hurt by a number of factors.

The holiday shopping season was brutally competitive in November and December. During those months, the busiest shopping period of the year, Wal-Mart had to slash prices to get customers to spend.

On top of that, the company said revenue at stores open at least a year fell in the first two weeks of February because of severe weather. It said it had more than 200 stores closed at the height of winter storms.

Additionally, the discounter said the expiration of a temporary boost in government food stamps was a big reason for a sales decline in its grocery business. And the company also said it's facing higher health-care costs because of a spike in enrolment from employees who see its plan as better than what's out in the individual market in the U.S.

These factors played out in the fourth-quarter earnings results. Wal-Mart earned $4.43 billion, or $1.36 per share, in the quarter that ended Jan. 31. That compares with $5.6 billion, or $1.67 per share, a year earlier.

Excluding charges related to closing stores in Brazil and China, Wal-Mart earned $1.60 per share. Revenue, which excludes its membership fees at the company's Sam's Club division, was up 1.4 per cent to $128.79 billion.

Analysts were expecting $1.59 per share on revenue of $129.9 billion, according to research firm FactSet.

Wal-Mart stores, which account for about 60 per cent of its business, recorded their fourth consecutive quarter of revenue declines at stores that have been open at least a year.

 

-- The Associated Press

Republished from the Winnipeg Free Press print edition February 21, 2014 B9

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