Walmart reports first-quarter loss, while J.C. Penney loss is higher than expected
Published: Wednesday, May 22, 2013 at 1:47 p.m.
Last Modified: Wednesday, May 22, 2013 at 1:47 p.m.
The first few months of the year were tough for Wal-Mart Stores Inc.
The world’s largest retailer reported last Thursday that its first-quarter profit edged up just slightly, and the company struggled with a sales slump in its namesake business during the three-month period. The discounter also offered a quarterly profit outlook that came below Wall Street’s projections. Its stock fell on the news.
Wal-Mart blamed a litany of factors affecting its budget-conscious customers, including a payroll tax increase, delayed tax refunds, job worries and bad weather. It is the latest in a string of big-name, consumer companies from McDonald’s to Macy’s, to cite such hurdles in the first quarter of the year.
“Frankly, we had a more difficult quarter than expected,” said Wal-Mart’s President and CEO Mike Duke in a pre-recorded call.
Wal-Mart is considered an economic bellwether because the retailer accounts for nearly 10 percent of nonautomotive retail spending in the U.S. The latest results indicate that many American households with lower incomes continue to struggle even as the job and housing markets improve.
“This is a reality check for Wal-Mart’s low-income shoppers,” said Brian Sozzi, CEO and chief equities strategist at Belus Capital Advisers. “The low-income shopper is even more financially stressed than people realize.”
While the company said lingering cool weather into April was a culprit in a sales shortfall for seasonal goods like spring fashions and sporting goods such as camping gear, Charles Holley, Wal-Mart’s chief financial officer, told reporters in a conference call that economic worries loom large.
“Our customers tell us that jobs and employment are high on the list of concerns,” he said.
Additionally, like many companies, Wal-Mart said that business during the first quarter was hurt by the government’s delay in processing income taxes and paying refunds. Wal-Mart said it cashed less in income tax refunds than a year ago.
Another big hurdle for Wal-Mart’s financially strapped shoppers have been tax changes, which executives said started having more of an impact as the first quarter progressed. An increase in the payroll tax of two percentage points, which took effect Jan. 1, means that take-home pay for a household earning $50,000 a year has been sliced by $1,000.
Such factors all helped to depress results. Wal-Mart earned $3.78 billion, or $1.14 per share, in the quarter that ended April 30. That compares with $3.74 billion, or $1.09 per share, a year earlier. Revenue rose 1 percent to $113.43 billion. That figure excludes Sam’s Club membership fees. Results fell short of Wall Street expectations for earnings of $1.15 per share on revenue of $115.78 billion.
The legacy of J.C. Penney’s former CEO is being felt at the department-store chain.
Penney last Thursday reported that it widened its loss in the first quarter on a 16 percent drop in revenue. It marks the fifth-straight quarter that the company has posted large declines.
The company’s stock fell 2 percent in extended trading after the earnings report was published.
The results show that J.C. Penney Co. Inc. is still reeling from the turnaround plan orchestrated by its former CEO Ron Johnson, who was ousted last month after less than a year and a half on the job.
The plan included getting rid of coupons and most sales in favor of everyday low prices, bringing in hip brands like Joe Fresh and remaking outdated stores. But the changes that were meant to attract younger, wealthier shoppers, wound up turning off its loyal middle-income, middle-age customers who favor sales and basic merchandise like loose-fitting khakis.