Walmart earnings dented by higher costs wages

Higher costs including a wage hike for US staff pushed Wal-Mart Stores’ profits down in the last quarter, the retail giant reported Tuesday.

Sales for the three months ending April 30 at $114.83 billion were flat compared to a year ago, but earnings fell seven percent to $3.3 billion.

Walmart posted higher revenues at namesake US stores, but sales dropped in both international Walmart and at its wholesale chain, Sam’s Club.

International sales suffered a $3.3 billion hit in the quarter due to the strong dollar.

Operating and administrative expenses rose 2.8 percent to $22.7 billion.

Walmart in February said it would raise wages for 500,000 workers in the US to at least $9 per hour, $1.75 above the federal minimum wage. The first series of wage increases took effect in April.

In addition to higher wages for US staff, Walmart has boosted spending on e-commerce investment.

Walmart chief financial officer Charles Holley said the wage hike will ultimately boost business because of the improved customer experience.

“We’re already seeing across-the-board better customer track surveys, so we think it’s already started to have a positive impact,” Holley said on a conference call with reporters.

But customer surveys have also shown shoppers remain cautious, with consumers in the US “using their tax refunds and the extra money from lower gas prices to pay down debt or put into savings,” said chief executive Doug McMillon.

The tight-fisted consumer environment gives Walmart an opening to score more grocery business, McMillon said.

Overseas shoppers are also generally “pretty cautious,” providing an opportunity to challenge stores not as focused on value, said Walmart international chief executive David Cheesewright.

“It varies market by market,” he said, but consumers in general are “very cautious and very concerned about making budgets balance.”

“So I think that’s quite a good time for our business.”

Walmart’s first-quarter earnings translated into $1.03 per share, a penny shy of analyst projections.

Walmart has forecast second-quarter earnings of between $1.06 and $1.18 per share, and analysts are expecting them to come in at the high end of that range.

Morgan Stanley said the first quarter results “were a bit weaker in magnitude and complexion than market expectations.”

Walmart shares tumbled 4.0 percent to $76.70 in mid-morning trade.

LEAVE A REPLY

Please enter your comment!
Please enter your name here