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Payroll taxes, petrol prices squeeze Walmart’s US customers

26 February 2013   (0 Comments)
Posted by: SAIT Technical
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By Jessica Wohl (Business Day/Reuters)

Executive summary

Walmart attributed weak US sales to higher payroll taxes, petrol prices and slow tax refunds affecting American Consumers. Its shares fell 1% in premarket trading.

Full article

WASHINGTON — Walmart Stores said on Thursday that US sales weakness persisted into early February, as Americans absorbed the effect of higher payroll taxes and petrol prices, along with slow tax refunds that put some spending on hold.

The weakness overshadowed the world’s largest retailer’s bigger-than-expected profit increase, which was helped by a lower-than-anticipated tax rate. Walmart also raised its dividend payout.

Its shares fell 1% in premarket trading.

Walmart US, Walmart’s largest unit by far, has had a slow start to this month, which Walmart US CE Bill Simon attributed largely to a delay in income tax refunds. The company expects sales at Walmart US stores open at least a year, or same-store sales, to be about flat during the current first quarter. A year earlier, such sales rose 2.6%.

"We are confident that our low prices will continue to resonate, as families adjust to a reduced paycheque and increased gas prices,” Mr Simon said.

Efforts such as extending its layaway programme and matching competitors’ prices attracted shoppers during the competitive holiday season, but Walmart US same-store sales rose just 1% in the fourth quarter. The company had forecast an increase of between 1% and 3%, and analysts, on average, had anticipated a 1.5% gain.

A year earlier, Walmart US same-store sales rose 1.5%.

Still, Walmart said its biggest unit gained market share in major categories of food, consumables, health and wellness and over-the-counter medications, as well as in entertainment and toys, which are big sellers during the holiday period. It cited data from Nielsen and the NPD Group.

Forecasts profit growth

Walmart earned $5.61bn, or $1.67 per share, from continuing operations in the fiscal fourth quarter, up from $5.19bn, or $1.51 per share a year earlier.

Walmart had forecast a profit of between $1.53 and $1.58 per share from continuing operations, and analysts expected it to earn $1.57 per share, according to Thomson Reuters I/B/E/S.

Revenue rose 3.9% to $127.92bn.

The company forecast first-quarter earnings per share of between $1.11 and $1.16, up from $1.09 a year earlier.

It also forecast fiscal-year earnings per share of between $5.20 and $5.40, including about $0.09 in increased costs for its e-commerce operations. It earned $5.02 per share in fiscal 2013.

Walmart spent $157m last year on its own probe of alleged bribery allegations in Mexico, Brazil, China and India.

A New York Times article in April last year unveiled alleged bribery at the major Mexican unit.

The company said its forecast includes about between $40m and $45m in first-quarter costs related to foreign corrupt practices and compliance matters.

Walmart said its fiscal year 2014 dividend would be $1.88 per share, up from $1.59 per share in fiscal 2013.


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