Wal-Mart Profit Climbed in Fourth Quarter, but Outlook Is Wary

The company reported higher-than-expected fourth-quarter earnings on Thursday of $5.6 billion, or $1.67 a share, up from $1.51 a share a year ago. The improvement was largely because of tax credits that lowered Wal-Mart’s corporate tax rate.

But the recent payroll tax increase slowed purchases toward the end of the holiday season, and an Internal Revenue Service delay in processing tax returns hurt sales this month.

Wal-Mart said it expected United States sales at stores open at least a year to change little in the current quarter from the same period in 2012. Same-store sales rose 1 percent in the fourth quarter, below analysts’ expectations of a 1.7 percent increase.

“We didn’t finish quite as strong as we would have liked, primarily due to a little slower holiday season than we would have planned,” said Wal-Mart’s chief financial officer, Charles M. Holley Jr., in a call with reporters.

Last year at this time, the company had cashed about $3 billion in checks related to tax refunds and anticipated refunds. This year, it has cashed just $1.7 billion, said William S. Simon, chief executive of Walmart U.S.

“Because of the late change in the tax law last year, the I.R.S. opened filings later than they did last year, and the result of that has been about a three-week delay in the status of tax refunds,” Mr. Simon said in the call. In response, customers may be delaying big purchases, he said.

“We also know that when a customer received an income tax refund, say, the week before the Super Bowl, we have pretty good data that suggests that they’ll buy a television, for example,” he said. “With the delay in the refund, moving into March, late March, we don’t have any visibility yet as to what they’ll do with their checks.”

Mr. Simon and Mr. Holley said the refund delay was the major factor affecting customers’ spending right now, though the payroll tax increase was also having an impact.

“We hear our customers talking about that a lot right now and making adjustments in what they do and what they buy,” Mr. Simon said. “We hear them talking about it more than we’re able to detect it in the sales patterns just yet.”

Wal-Mart’s guidance for the current quarter and fiscal year 2014 was weaker than expected, “indicating a sluggish start to the year” and “a relatively muted consumer environment,” wrote Colin McGranahan, an analyst at Sanford C. Bernstein, in a note to clients.

Mr. Simon said the company had experienced a return to “a more normal sales pattern” last week, once refund checks started arriving. Still, he said, for many customers, “we don’t know when those checks are going to come.”

Wal-Mart shares rose 1.5 percent on Thursday, to $70.26, as the company reported its earnings and increased its dividend payout to shareholders by 18 percent, to $1.88 a share. Profit, at $1.67 a share, was higher than the $1.57 a share forecast. That was primarily because of a lower-than-usual tax rate, largely because of the American Taxpayer Relief Act passed just after the new year, executives said.

Wal-Mart’s global sales rose 3.9 percent from the quarter a year ago, to $127.1 billion.

There were bright spots for Walmart U.S., including the sporting goods category, where guns and ammunition sales “are mirroring the market right now,” Mr. Simon said. Since the mass shooting in Newtown, Conn., as lawmakers have expressed renewed interest in limiting gun sales, prices have increased and supply has dried up. Walmart is continuing its three-box limit on ammunition purchases, and “there are certain firearms that are very difficult to get,” Mr. Simon said.

The apparel category posted its first positive full-year comparable sales figure in seven years. After a foray into fashionable items, Walmart has retreated to selling basics.

The company’s international unit, which had been a growth engine, did not keep up its pace. “We were not satisfied with the fourth quarter” internationally, said Michael T. Duke, Wal-Mart’s chief executive, in prepared remarks. Sales for international stores grew 6.9 percent to $37.9 billion.

C. Douglas McMillon, chief executive of Wal-Mart International, said in prepared remarks that the holiday season had not gone as planned in several markets; that sales in countries where Wal-Mart is well established, like Japan, Canada and Britain, were under pressure; and that the company’s decision to slow down store openings in Mexico, China and Brazil had affected results.

Executives made few comments about the ongoing Foreign Corrupt Practices Act investigation into Wal-Mart’s conduct in Mexico, Brazil, China and India, other than to stress the company’s commitment to ethical behavior and to note in a regulatory filing that it spent $153 million in the last fiscal year on expenses and professional fees related to the matter.

This article has been revised to reflect the following correction:

Correction: February 21, 2013

An earlier version of this article misstated the amount of refund-anticipation and refund checks Wal-mart had cashed by this time last year. It was $3 billion, not $4 billion.

Article source: http://www.nytimes.com/2013/02/22/business/wal-mart-profit-climbs-but-outlook-is-wary.html?partner=rss&emc=rss