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Walmart forecast trails estimates as economy hurts sales

By Renee Dudley
Bloomberg News

Wal-Mart Stores Inc., the world’s largest retailer, forecast profit this year that trailed analysts’ estimates as the sluggish U.S. economy and government benefit cuts threaten to restrain sales.

Profit per share in the year through January 2015 will be $5.10 to $5.45, the Bentonville, Ark.-based company said Thursday.

The average of 28 analysts’ estimates compiled by Bloomberg was $5.55 a share.

Chief Executive Officer Doug McMillon, who took the post earlier this month, is trying to revive Walmart’s U.S. same-store sales growth after lower food-stamp payments, higher taxes and struggles to keep shelves fully stocked contributed to four consecutive quarterly declines.

Chief Financial Officer Charles Holley said Thursday that the economic trends, as well as higher health-care costs, will continue to hurt the domestic business.

“They continue to be pressured by the low-income consumer,” said Brian Yarbrough, an analyst at Edward Jones & Co. in St. Louis. “I don’t see that changing.”

He recommends buying the shares, which have dropped about 5 percent this year.

Fourth-quarter net income fell 21 percent to $4.43 billion, or $1.36 a share, from $5.61 billion, or $1.67, a year earlier, the company said today. Excluding some items, profit was $1.60 a share. The average of 22 analysts’ estimates compiled by Bloomberg was $1.59.

Revenue increased 1.5 percent to $129.7 billion in the quarter ended Jan. 31. Analysts projected $130.2 billion. Sales at Walmart U.S. stores open at least 12 months excluding fuel fell 0.4 percent.

Walmart increased its dividend 2.1 percent to $1.92 a share for its fiscal 2015. The first quarterly payout will be on April 1 to shareholders of record as of March 11.

Earnings per share in the current quarter will be $1.10 to $1.20, Walmart said. Analysts projected $1.24, the average of 20 estimates compiled by Bloomberg.

U.S. comparable-store sales have fallen in the first two weeks of February because of winter storms that closed more than 200 stores at their peak, said Bill Simon, Walmart U.S. CEO, in a statement.

Walmart will accelerate the expansion of its smaller-format Neighborhood Market and Walmart Express stores this year, opening 270 to 300 of the locations this year, almost doubling its number, Simon said.

The faster growth will boost capital spending to $12.4 billion to $13.4 billion for the year, $600 million more than the company previously projected, Walmart said.

The U.S. Department of Justice and the U.S. Securities and Exchange Commission are investigating allegations that Walmart systematically bribed Mexican officials so it could more quickly open stores in the country.

Federal and local government agencies in Mexico also are involved in investigations. Walmart has said it also has started inquiries into potential violations of the Foreign Corrupt Practices Act in Brazil, India and China.

The company said expenses related to its probe and compliance matters would be about $200 million to $240 million for the year.

Fourth-quarter sales in Walmart’s Sam’s Club warehouse division rose 1.3 percent to $14.7 billion.


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