Wal-Mart's 4Q profit up 8.6 per cent, but wary outlook shows squeezed customers

NEW YORK, N.Y. – Wal-Mart Stores Inc. offered a weak business outlook Thursday as new economic challenges for its low-income U.S. shoppers start to take a toll.

The world’s largest retailer reported an 8.6 per cent increase in profit for the fourth quarter, which includes the crucial holiday season. But higher gasoline prices, late tax refunds and the payroll tax increase in the U.S. have it wary about the coming year.

The U.S.-based Wal-Mart is considered an economic bellwether because the retailer accounts for nearly 10 per cent of nonautomotive retail spending in the U.S. Low- and lower-middle-income people have continued to struggle, even as the housing and stock markets improve.

“We know there are challenges ahead, but we believe our strong financial position … will continue to produce strong sales and returns for our shareholders,” Chief Financial Officer Charles Holley said in statement.

Investors were bracing for a subdued report after a Bloomberg report last week on an email from a top executive characterizing the first two weeks of February as “a total disaster.”

Wal-Mart acknowledged in Thursday’s report that February started “slower than planned” but noted that it was largely due to the delay in tax refund checks.

For the current quarter, Wal-Mart expects revenue at stores open at least a year at its U.S. namesake business to be flat with last year. That represents a slowdown from the 1 per cent increase in the fourth quarter.

The fourth-quarter gain is below the 1.5 per cent increase analysts polled by Thomson Reuters expected. Overall, revenue at stores open at least a year rose a modest 1.2 per cent, including a 2.3 per cent gain at Sam’s Clubs. Analysts had expected a 1.8 per cent increase.

Internationally, Wal-Mart is facing continued challenges and is focusing on increasing profitability in countries like Brazil and China. The company said the United Kingdom was particularly tough.

The company is still grappling with bribery charges related to its operations in Mexico that surfaced last April. The allegations are that it failed to notify law enforcement that company officials authorized millions of dollars in bribes in Mexico to speed up getting building permits and gain other favours.

The company has launched its own investigation and is working with government officials in the U.S. and Mexico. Last November, the retailers said in a filing with the Securities and Exchange Commission that it was looking into potential U.S. bribery law violations in Brazil, China and India.

During a pre-recorded call to investors, CEO Mike Duke said that the company has “made significant improvement to our compliance programs around the world in 2013 and took a number of specific actions with respect to the processes, procedures and people.”

Wal-Mart says it earned $5.6 billion, or $1.67 per share, in the quarter ended Jan. 31. That’s up from $5.16 billion, or $1.50 per share, a year earlier.

Net sales rose 3.9 per cent to $127.1 billion.

Earnings topped estimates of $1.57 per share, but net sales fell short of the $127.8 billion estimate.

The company says it expects earnings per share to range from $1.11 per share to $1.16 per share for the first quarter. That’s below analysts’ expectations for a $1.18 per share estimate, according to FactSet.

For the year, Wal-Mart expects earnings per share between $5.20 and $5.40 per share. Analysts expect $5.38 per share, according to FactSet.

Wal-Mart also raised its quarterly dividend by 18 per cent to 47 cents