Wal-Mart to double small-store expansion programme

Wal-Mart to double small-store expansion programme

Wal-Mart saw its share price fall this morning (20 February) after the retail giant posted a fall in fourth-quarter earnings and lowered its fiscal 2015 sales guidance.

In the three months to the end of January, net income amounted to US$4.4bn, a drop of 21% on last year. Earnings were affected by Brazil employment claim and tax contingencies, store closures in China and Brazil, costs related to the termination of its India joint-venture, and Sam's Club restructuring costs.

Severe weather in the US also affected profits, which Wal-Mart had warned in late January would hit its fourth-quarter.

Operating income fell 3.1% to $26.9bn, due to price investments, higher expenses, investments in e-commerce and soft sales.

Net sales, however, edged up 1.4% to $128.8bn. Currency negatively impacted revenues by around $5.1bn, but acquisitions added $0.7bn.

In the US, sales were up 2.4%, while comparable-store sales declined 0.4%. International revenues grew 1.3%.

For fiscal 2015, Wal-Mart lowered its initial sales guidance. In October, the retailer forecast a 3-5% net sales increase. It now expects this to be toward the low end of the guidance.

"We expect economic factors to continue to weigh on our outlook," said CFO Charles Holley. "Some of the factors affecting our consumers include reductions in government benefits, higher taxes and tighter credit. Further, we have higher group health care costs in the US. These concerns, combined with investments in e-commerce, will make it difficult to achieve the goal we have of growing operating income at the same or faster rate than sales."

Separately, Wal-Mart said it would double its US small-store expansion programme. The group now expects to add around 270 to 300 small stores during the fiscal, doubling its initial October forecast of 120 to 150.

Wal-Mart operates 346 Neighborhood Markets and 20 Walmart Express stores.

To fund this additional growth, the retailer has revised its capital expenditures forecast for the US segment to $6.4bn to $6.9bn, up from an initial range of $5.8bn to $6.3bn.

Wal-Mart's share price was down 1.55% to $73.62 at 10:48 ET.

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