Wal-Mart cuts profit forecast on sluggish Q2

Bentonville, Ark. – Wal-Mart Stores Inc. stayed the course in the second quarter, delivering profit within Wall Street expectations, but cut its forecast for the full year as its U.S. business remains lackluster and costs associated with building new smaller-format stores, healthcare and e-commerce improvements continue to rise.

Consolidated net income in the second quarter edged up 0.6% to $4.1 billion from $4.07 billion in the year-ago period. Net sales rose 3% to $119.3 billion from $116.1 billion and U.S. same-store sales without fuel were flat. Traffic in U.S. stores was negative for the seventh consecutive quarter as the world’s largest retailer struggles to turn its domestic business around.    

On the international front, Wal-Mart has showed continued strength; every country except China saw positive same-store sales.

CEO Doug McMillon pointed to the international strength, as well as e-commerce and Neighborhood Market sales in the U.S., as bright spots in the quarter. Same-store sales at Wal-Mart's Neighborhood Market stores increased 5.6% over last year. Wal-Mart opened 22 Neighborhood Market stores in the second quarter and plans to add between 180-200 for the year. "We really like the position of our smaller stores,” CFO Charles Holley said in a media call.

Thursday’s results didn’t surprise Wall Street, which had low expectations leading up to the report. U.S. CEO Bill Simon’s recent departure left investors concerned that efforts to improve store merchandise and operations had not made a meaningful difference on sales and traffic.

Wal-Mart said it now expects earnings for the year of $4.90 to $5.15 a share, down from its previous range of $5.10 to $5.45 a share. U.S. comparable-store sales in the three months ending Oct. 31 should be relatively flat, the company said.

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