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 In the uneven economic recovery, their bills are going up, but their
wages are not. While the well-heeled crowd benefits from gains in
the stock market, Wal-Mart shoppers are still struggling with a
higher payroll tax. And shopping for bargains isn't a hobby, but a
necessity.
For these reasons, the world's largest retailer on Thursday cut its
annual outlook for the second time in three months and gave
fourth-quarter guidance that's below Wall Street's expectations.
The forecast, which comes as rivals Nordstrom, Kohl's and Macy's
reported mixed results, shows how vulnerable Wal-Mart — and its
customers — are to economic ups and downs. Wal-Mart shoppers, who on
average make $45,000 a year, were squeezed by the recession that
began at the end of 2007 and have struggled to recover since it
ended in 2009.
They've been dealing with a 2 percentage point increase in the
Social Security payroll tax since Jan. 1. A partial 16-day
government shutdown this year also hurt business in areas with large
military bases. And the Nov. 1 expiration of a temporary boost in
government food stamps could also hurt customers' ability to spend,
though the discounter says it's too early to know.
On top of that, Wal-Mart is facing increased competition from online
rivals like Amazon.com, which is opening warehouse hubs closer to
cities to speed up delivery. Another threat: Dollar stores, which
have convenient locations and name-brand products at discounted
prices.
"The retail environment, both in stores and online, remains
competitive," said Mike Duke, president and CEO of Wal-Mart Stores
Inc. "At the same time, some customers feel uncertainty about the
economy, government, jobs stability and their need to take care of
their families through the holidays."
Wal-Mart earned $3.74 billion, or $1.14 per share, in the three
months that ended Oct. 31. That compares with $3.64 billion, or
$1.08 per share, a year earlier. Net sales rose 1.6 percent to
$114.88 billion. On a constant currency basis, net sales would have
been $116.2 billion.
Analysts were expecting earnings of $1.13 per share on net sales of
$116.9 billion.
Overall, total sales increased 2.4 percent for Wal-Mart's U.S.
business, 1.1 percent at Sam's Clubs and 0.2 percent at Wal-Mart's
international business.
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But Wal-Mart reported a decline in a figure that the industry uses
to gauge a company's performance. Revenue at stores open at least a
year fell 0.1 percent for all U.S. stores, but included a 1.1
percent increase at Sam's Clubs.
Wal-Mart's U.S. stores, which account for 58 percent of the
company's total sales, had a third straight quarter of declines,
with revenue at stores open at least a year falling 0.3 percent.
Wal-Mart blamed slower-than-expected spending in the beginning of
the quarter, but said business picked up in September and October.
There was a bright spot. Revenue at stores open at least a year rose
3.4 percent at its smaller Neighborhood Market stores, which are
only about 38,000 square feet and carry fresh produce, meat and
beauty products. Wal-Mart has 300 Neighborhood Market stores but
plans to use them to grow its business.
Going forward, Wal-Mart, like its rivals, is making changes heading
into the holiday shopping season in the U.S. It's bringing back its
holiday layaway program and tweaking prices on TVs and other popular
holiday products more than last year. The company also pulled up
some deals reserved for Thanksgiving weekend, having them start on
Nov. 1.
Wal-Mart said it expects adjusted earnings per share to be $1.60 to
$1.70 for the fourth quarter. For the year, it expects $5.11 to
$5.21, compared with its forecast of $5.10 and $5.30 per share in
August. That was downgraded from May's forecast.
Analysts expected adjusted earnings of $1.69 per share for the
fourth quarter and $5.19 per share for the full year, according to
research firm FactSet.
Wal-Mart shares closed up 18 cents to $79.08.
[Associated
Press; ANNE D'INNOCENZIO, AP Retail Writer]
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