Wal-Mart stocks hit record high then plummets after quarter performance

New York TimesMay 16, 2013 

Despite several quarters of controversy over bribery allegations in Mexico, Wal-Mart’s profitable earnings and strong sales in recent quarters made it a Wall Street darling, with its stock price hitting a record high Wednesday.

On Thursday, though, the company’s financial picture worsened as it reported quarterly results that missed analysts’ expectations, citing everything from a cold spring to late tax refunds, and the stock price began to decline.

“We didn’t have the first-quarter performance we wanted,” Michael T. Duke, chief executive, said in prepared remarks.

Net income rose to $3.8 billion, up 1.1 percent from the period a year earlier, while revenue rose 1 percent, to $114.2 billion; analysts expected revenue of $116.3 billion.

U.S. same-store sales dropped for the first time since the summer of 2011, declining by 1.4 percent, versus Wal-Mart’s projection of around flat. Visits to stores also fell, by 1.8 percent in the quarter.

Shares fell $1.36 per share, or 1.7 percent, to close at $78.50 Thursday.

While consumers remained under pressure, nothing dramatic had changed with their economic state in the quarter, said Charles M. Holley Jr., Wal-Mart’s chief financial officer, in a call with reporters. Instead, the lower-than-expected sales in the United States were due to colder weather than last year, the payroll tax increase, tax refunds that came in later than usual and a lack of food inflation.

Internationally, the company’s sales grew 2.9 percent, to $33 billion, and Wal-Mart said it increased market share in several countries despite the weak sales. Duke said that the company was “disappointed in our expense control in International”; Holley explained that Wal-Mart International lacks many of the tools the domestic business does in terms of forecasting when employees need to be in stores or when customer traffic will spike.

On a per-share basis, earnings for the fiscal first quarter, which ended April 30, were up 4.6 percent to $1.14 per share, a penny below analysts’ expectations. The company forecast lower second-quarter profit than the $1.29 a share analysts were expecting, giving a range of $1.22 to $1.27. Its shares were trading down 2.2 percent.

Expenses for the quarter shot up by 44.4 percent, or $200 million, mostly because of a larger bill for the bribery allegations in Mexico than expected. Last year, The New York Times reported that Wal-Mart de Mexico officials had paid bribes to smooth expansion in the country, and executives at the company’s Bentonville, Ark., headquarters knew of the bribes and declined to take action.

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