Difficult second quarter for Walmart prompts profit alert

Difficult second quarter for Walmart prompts profit alert

Following a weak second quarter with a 10 % drop in net profit, the world's largest retailer Walmart has lowered its full-year forecast. Turnover remained pretty much level, with a 0.1 % increase to 120.3 billion dollars (109 billion euro).

Turnover remained level

Particularly the company's quarterly profit got pummeled, down from 4.4 billion dollars last year to 3.6 billion dollars (3.2 billion euro) now. Chairman Doug McMillon points to "increasing labour costs" and "negative exchange rate fluctuations" as the main causes for the drop, although additional online investments and lower fees for medical products have also played their part.

 

The British supermarket subsidiary, Asda, is also struggling to compete with discounters like Aldi and Lidl and the persistent price war has resulted in a 4.7 % like-for-like turnover drop over the past quarter. CEO Andy Clark does see "signs of improvement in the third quarter" though.

 

Full-year forecast down 10 %

Walmart emphasizes it needs to run up costs in order to achieve its intended growth in the future: "Even if it is not as fast as we would like, the fundamentals of of serving our customers are consistently improving. [...] In this case, our desired changes require investments, which are pressuring earnings this year," McMillon said.

 

The result is a sizeable profit alert: for its current fiscal year - which runs until 31 January 2016 - it predicts a 4.4 to 4.7 dollar profit per share. That is about 10 % lower than its first estimate, which was a 4.7 to 5.05 dollar profit per share.

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