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.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.