360° Coverage : Wal-Mart Lowers Outlook As Profit And Same Store Sales Decline;...

2 Updates

Wal-Mart Lowers Outlook As Profit And Same Store Sales Decline; Could A Family Dollar Acquisition Turn Things Around?

Feb 20 2014, 9:15am CST | by

Superstore chain Wal-Mart offered a mixed bag of quarterly results Thursday morning, posting fourth quarter profit that beat the Street by a penny but fell compared to the same quarter last year,...

Filed under: news


34 weeks ago

Wal-Mart Lowers Outlook As Profit And Same Store Sales Decline; Could A Family Dollar Acquisition Turn Things Around?

Feb 20 2014, 9:15am CST | by

Superstore chain Wal-Mart offered a mixed bag of quarterly results Thursday morning, posting fourth quarter profit that beat the Street by a penny but fell compared to the same quarter last year, revenue that increased but same store sales that decreased, and lowering its outlook for fiscal year 2015 while raising its dividend for the same period. Meanwhile, some analysts are proposing that an acquisition of Family Dollar could help stabilize Wal-Mart’s business and provide a much needed boost.

Wal-Mart posted $129.7 billion in fourth quarter 2014 revenue, a 1.5% increase over the prior-year quarter that just about matches Street expectations. Fourth quarter net income fell 21% to $4.4 billion, resulting in earnings of $1.34 per share. Adjusted for special items — which Wal-Mart said included factors like store closures in Brazil and China and Sam’s Club restructuring — Wal-Mart’s fourth quarter earnings came in at $1.60 per share, a figure that beat the Street consensus by a penny.

On a full year basis, Wal-Mart saw $476.3 billion in total revenue, a 1.6% increase over full-year 2013 revenue. Full-year net income fell 5.7% to $16 billion, resulting in full-year earnings of $4.85 per share, a 3.2% drop compared to the $5.01 per-share profit reported for full-year fiscal 2013.

Also disappointing was Wal-Mart’s fourth quarter same store sales in the U.S., which fell 0.4%, about as much as analysts were expecting. Bill Simon, Walmart U.S. president and CEO, said that the decline is extending into the company’s first quarter results, and same store sales were down for the first two weeks of February thanks to “continued severe winter storms.” However, United Food and Commercial Workers senior capital markets economist John Marshall said that snowy weather is an easy excuse that doesn’t completely explain the sales decline.

“They’ve got 4,000 stores in the U.S. and the majority were completely unaffected by the weather,” Marshall said in a recent phone interview. “When people know a storm is coming, they buy things to help them hunker down in their homes. We often see a boost in spending” in advance of bad weather, he explained.

The same-store sales figure also includes an 0.4% boost from e-commerce sales, which Marshall noted is a newer segment growing at a higher annual rate because it has a lower baseline — which translates to even worse news for Wal-Mart brick and mortar traffic. One possible reason for this decline, Marshall said, is that there has been a “significant decline” in the company’s pricing advantage, and recent research has shown that the price premium consumers have to pay at Wal-Mart’s competitors is, in some markets, completely gone. “Wal-Mart for a long time said you may not like us, we might not always have products on our shelves, but when you find our products, they’ll be the lowest price. If that’s not the case anymore, and evidence is growing that it’s not, Wal-Mart is in a difficult position,” he said.

In a statement released Thursday morning, Wal-Mart president and CEO Doug McMillon said that same store sales improvement is a “key priority, and we’ll focus on being even stronger item and category merchants, delivering value and improving our service levels.”

McMillon said that in an effort to deliver more convenience and increase the brand’s relevance, the company is accelerating its small-store growth. To that end, the company is expanding its original plans to open 120 to 150 smaller-format stores this year, and is now planning on opening between 270 and 300 small format stores this year alone.

“Neighborhood Markets continued to deliver consistent solid comp sales growth, and customers appreciate the convenience of our small stores. They are a proven model,” U.S. division president Simon said in a statement. “We’re also pleased with how well the 20 Express stores are doing, and we’re expanding our pilot beyond the initial three markets.”

Some Wall Street analysts, however, think Wal-Mart’s small-store expansion would be better served if it acquired an existing dollar-store brand, like Family Dollar, Dollar General or Dollar Tree. A recent Credit Suisse report said that Family Dollar would be the smartest of the bunch to acquire, because of the relatively low overlap in market share.

“Our proprietary geographic analysis suggests that acquiring Family Dollar could be the most logical way for Wal-Mart to significantly jumpstart the small store effort. Compared to Dollar General and Dollar Tree, Walmart has the lowest overlap in store locations with Family Dollar,” wrote reserach analyst Michael Exstein, noting that this low market share overlap translates to the least risk in opposition from the FTC. “We think Wal-Mart could pay a 20-30% premium for Family Dollar in an immediately accretive deal,” he said.

Looking ahead to its fiscal year 2015, Wal-Mart provided more bad news for investors, saying that economic factors are weighing on its outlook. Chief among these factors are reductions in government benefits (like the SNAP food-stamp program), higher taxes and tighter credit, said Charles Holley, Wal-Mart executive vice president and CFO. “Further, we have higher group health care costs in the U.S. 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,” Holley said. “In October, we forecasted a 3 to 5% net sales increase for fiscal 2015. Given these factors and the ongoing headwind from currency exchange, we expect to be toward the low end of the net sales guidance.”

In a separate release Thursday morning, Wal-Mart also announced that it is increasing its annual dividend in fiscal year 2015, up to $1.92 per share from the prior-year’s $1.88 per share. The dividend will be paid in four quarterly installments of 48 cents per share.

Following the release of the earnings results and the dividend increase, shares of Wal-Mart fell more than 2% in pre-market trading Thursday morning, opening at $73.38, lower than its Wednesday closing price of $74.85. Year-over-year, the stock has seen an 8.2% return. Potential acquisition target Family Dollar, meanwhile, also opened Thursday trading with a slight downturn, and is currently down about 0.8%. Year-over-year, the dollar store chain has posted a near-20% return.

Source: Forbes Business


7 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and ...
Source: Business Times Singapore   Full article at: Business Times Singapore


7 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of ...
Source: Business Times Singapore   Full article at: Business Times Singapore


Don't miss ...


<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.


blog comments powered by Disqus

Latest stories

Viagra may protect your heart
London, Oct 20 (IANS) An ingredient in Viagra not only can enhance the pleasure between the sheets but can also protect your heart, a study has found.
Kids' genes put mothers at risk of joints disease
New York, Oct 20 (IANS) Having children with certain genetic makeup, inherited from the father, increases the mother's risk of rheumatoid arthritis - a chronic disorder that affects joints, says a new study.
'Ancient fish pioneered penetrative sex'
Sydney, Oct 20 (IANS) Sexual intercourse was pioneered by a group of unsightly, long-extinct fish about 385 million years ago in Scotland, Australian scientists have reported.
NASA Mars orbiters safe after comet flyby
Washington, Oct 20 (IANS) All three NASA orbiters around Mars confirmed their healthy status after each took shelter behind the Red Planet during a period of risk from dust released by a comet that sped past Mars Sunday - closer than any other known comet flyby off a planet.

Latest from the Network

Bush shoe-tossing painting hits record at Doha auction
Doha, Oct 15 (IANS/EFE) A controversial painting by Iranian artist Mahmud Obaidi, depicting an Iraqi journalist throwing shoe in 2008 at then US president George W. Bush, was sold for $62,500 at a Sotheby's auction in...
Read more on Celebrity Balla
US offers $45 mn bounty for eight terror leaders
Washington, Oct 15 (IANS) The US said Tuesday it is offering rewards totalling up to 45 million dollars for information on eight key leaders of the Al Qaeda in the Arabian Peninsula (AQAP) terrorist organisation. The...
Read more on Politics Balla
UNSC extends peacekeeping mission's term in Abyei
United Nations, Oct 15 (IANS) The UN Security Council (UNSC) has renewed the mandate of the UN peacekeeping mission in the Abyei border region between Sudan and South Sudan. In an unanimously adopted resolution, the...
Read more on Politics Balla
Ebola cases in West Africa could reach 10,000 per week: WHO
Geneva, Oct 15 (IANS) The World Health Organisation (WHO) has warned that the Ebola epidemic in West Africa could reach 5,000 to 10,000 cases per week by the first week of December. "Quite frankly, ladies and...
Read more on Business Balla
Turkey, Singapore sign strategic partnership agreement
Ankara, Oct 15 (IANS) Turkey and Singapore have signed a strategic partnership agreement to boost economic, political and cultural cooperation, as well as security collaboration, during the official visit of...
Read more on Politics Balla
Christina Aguilera is returning to 'The Voice' USA
Christina Aguilera will return to 'The Voice' USA next year. The 'Your Body' hitmaker, who previously shared a rotating spot on the judging panel with Shakira, has been replaced by Gwen Stefani this season as she is...
Read more on Celebrity Balla
Kesha's music producer hits back
Kesha is being countersued by her record company boss, Dr. Luke. The 41-year-old music producer, who runs Kemosabe Records, claims the 27-year-old 'Tik Tok' singer is a liar and is trying to extort him after she accused...
Read more on Celebrity Balla
Jason Derulo won't get back together with Jordin Sparks
Jason Derulo insists his split from Jordin Sparks is permanent. The 'Talk Dirty' hitmaker, who recently ended his relationship with the 'No Air' singer after three years of dating, has ruled out getting back together...
Read more on Celebrity Balla
Josh Groban feels 'very lucky' to be dating Kat Dennings
Josh Groban feels ''very lucky'' to be dating Kat Dennings. The 'Brave' hitmaker was very nervous before singing in front of the '2 Broke Girls' actress for the first time at the Carousel of Hope Ball in Beverly Hills,...
Read more on Celebrity Balla
Australian Richard Flanagan wins 2014 Man Booker prize
London, Oct 15 (IANS) The first Man Booker prize to allow American nominees was Tuesday night won by an Australian, with Richard Flanagan triumphing for a novel of love and war that tells the harrowing stories of...
Read more on Celebrity Balla