US Retail giant Wal-Mart today (August 18th) posted second quarter profit down 15 per cent from last year. The company also trimmed earnings outlook for 2016.
It reported a net income of $3.4 billion (£2.2 billion) or $1.08 per share in the three months to July, down from $4.09 billion a year earlier. On average, 26 analysts polled by Thomson Reuters expected the company to report earnings of $1.12 per share for the quarter.
It blamed the dip on increasing costs due to a strong dollar as well as weaker margins in its US pharmacy business.
Push on customer service
It added its profits were also being weighed down by a decision to increase the hours of workers as part of a push to improve customer service.
"We're pleased that the investments we've made are helping to improve our business. Even if it's not as fast as we would like, the fundamentals of serving our customers are consistently improving, and it's reflected in our comps and revenue growth," President and chief executive officer Doug McMillon said in a statement.
He added: "In this case, our desired changes require investments, which are pressuring earnings this year."
Chief financial officer Charles Holley announced that operating profit would continue to take a hit in the remainder of the year because of the company's commitment to higher wages and additional hours for employees.
On a positive note, the company said sales at stores open more than a year in the United States increased 1.5 per cent in the 13 weeks ended July 31 from a year earlier, helped by lower oil prices.
Wal-Mart also announced it now plans to open 160 to 170 of its smaller format stores in the full year to January, down from a previous plan for 180 to 200 stores.
The retailer shares fell 2.2 per cent to $70.30 in premarket trading.
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