Walmart fourth-quarter earnings show challenges

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Shoppers head in and out of a Walmart store in Rosemead, Calif., last month. On Jan. 31, Walmart said bad weather and cuts in food stamp support for the poor weighed on U.S. sales and would hit earnings for the fourth quarter.

Shoppers head in and out of a Walmart store in Rosemead, Calif., last month. On Jan. 31, Walmart said bad weather and cuts in food stamp support for the poor weighed on U.S. sales and would hit earnings for the fourth quarter.

This winter’s wrath put a chill on Walmart’s sales in the fourth quarter, leading to profit of $4.4 billion, a 21% drop, the company said Thursday.

Walmart’s earnings per share were $1.34, down from $1.67 in the same quarter last year. For fiscal 2014, the company reported EPS of $4.85, a 2.0% increase over fiscal 2013′s EPS of $5.01.

That missed Wall Street estimates for annual earnings per share of $5.11 and its quarterly estimate of EPS of $1.59.

The numbers were in line with estimates, however, when adjusted for one-time items, “so Q4 was fine,” said Brian Yarbrough, a consumer research analyst at Edward Jones.

Walmart shares were down were down $1.43, or 1.91% to about $73.42 at the market open.

Walmart CEO Doug McMillion emphasized that the company’s global online sales, including acquisitions, topped $10 billion, a 30% increase over last year.

“We will continue to grow our global business by focusing on customers and serving them how they want to be served,” said McMillion.

Improving store sales figures will be a priority, McMillion said, “and we’ll focus on being even stronger item and category merchants, delivering value and improving our service levels. We’ll remain focused on our expense structure, and innovate to improve productivity and aid our ability to deliver everyday low prices.”

Also Wednesday, Walmart doubled its plan to open small stores during fiscal year 2015 to 270 to 300 of its Neighborhood Market stores.

Walmart also said its board approved a 2% increase in the annual cash dividend for fiscal year 2015 to $1.92 per share. The dividend will be paid in four quarterly installments of $0.48 per share.

Walmart warned in late January that its fourth quarter would be hit hard by weather woes and reductions in food stamp benefits.

But the world’s biggest retailer has other challenges. Walmart is losing market share to dollar stores and grocer Kroger, which tries to compete with Walmart on price, something not all chains have attempted, Yarbrough says. Walmart sales in grocery were negative again compared to some of its major competition, which have seen sales increases, Yarbrough said.

While sales in clothing and home products were good, “we believe they have some work to do on the grocery side of the business, Yarbrough said.

And dollar stores have other benefits, too, he says.

“Something tells me people are more into convenience right now,” says Yarbrough. “You can get in and out of a dollar store in two to three minutes, about the time it takes to walk from your car into a Walmart.”

Walmart U.S. CEO Bill Simon acknowledged dollar store competition in an earnings call early Wednesday.

The increase in planned openings of small stores, while tiny when compared to Walmart’s mammoth overall footprint, helps the chain compete with dollar stores, Walmart said, especially in areas where consumers are especially sensitive to fuel prices. Besides, Walmart’s small-store sales are also about four to seven times what dollar stores’ are, said Simon.

Courtesy of USA Today

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