Wal-Mart expects a lower Q4 profit

Bloomberg NewsJanuary 31, 2014 

— Wal-Mart Stores said Friday that fourth-quarter profit will be at or below the low end of its forecast because of extra costs in Brazil as well as lower food-stamp benefits and winter storms that hurt U.S. sales.

Same-store sales at U.S. stores and the Sam’s Club warehouse division will be less than projected, the Bentonville, Ark.-based company said in a statement. Wal-Mart said in November that profit per share in the quarter that ended Friday would be $1.60 to $1.70. Analysts estimated $1.65, on average.

Wal-Mart, already grappling with a holiday season marked by profit-eating discounts, said the reduction in the U.S. government’s Supplemental Nutrition Assistance Program that went into effect Nov. 1 hurt sales more than expected. The company also is facing higher tax liabilities and employment claims in Brazil.

“They’ve lost a lot of their advantage here in the U.S. on pricing,” Scott Mushkin, an analyst at Wolfe Research Securities in New York, said Friday in a telephone interview. “The international business has not been performing where they hoped or where investors hoped.”

The company, which closed 50 stores in Brazil and China, said non-income tax items in the South American nation will reduce profit in the quarter by 6 cents a share and that employment claims there will cut profit by 5 cents. Wal-Mart has been struggling to grow in Brazil as it works to reintroduce its everyday low price strategy there.

A change in the way Wal-Mart accounts for leases in China will reduce profit by 3 cents a share, and a restructuring at Sam’s Club that included 2,500 job cuts will trim 1 cent from earnings.

The retailer said in October that it would close as many as 30 underperforming stores in China while adding 110 locations there in three years.

Doug McMillon, who led the international business and takes over as CEO on Saturday, said China is “one of the biggest opportunities” for Wal-Mart around the world.

A week ago, Wal-Mart said it would eliminate employees such as assistant managers and phone attendants at Sam’s Club to streamline management at clubs of varying sizes.

The company plans to report full fourth-quarter results on Feb. 20.

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