The biggest retailer in the world and another major retailer that caters to the middle class reported 1st quarter results today. Wal-Mart is the retail industry. They are worldwide. Their results tell the truth about the global economy. And the truth is it sucks. Same store sales FELL. Traffic FELL. They missed their own February forecast. This is versus an extremely weak first quarter last year. They are lowering their earnings guidance. They admit that things are getting worse. Wal-Mart is the canary in the global coal mine. It is looking woozy.
Kohl’s is my favorite store. Their sales also FELL. Their earnings FELL. Again, this is versus an extremely weak 1st quarter of 2012. They are totally U.S. based and their main customer is the middle class. I always know when they are struggling, because they send 30% off coupons when they are struggling and 15% coupons when times are good. We received a 30% coupon in the mail yesterday.
Their sales are falling without taking inflation into account. Their real sales are falling by 4% to 6%.
These results are a reflection of what is happening in the real world to real people. The stock market can reach new highs day after day, but it is doing nothing for the average person. This dichotomy will continue until it can’t go any further. Retail sales will continue to fall. There is no recovery just around the corner. Kohls and Wal-Mart and all of the big box retailers will be shuttering stores over the next decade. The unsustainable debt financed boom is over.
Wal-Mart EPS guidance below analyst consensus
By Saabira Chaudhuri
Wal-Mart Stores Inc.’s (NYSE:WMT) fiscal first-quarter earnings rose 1.1% as the world’s largest retailer reported slightly stronger revenue, though same-store sales missed expectations amid a delay in income tax refund checks, challenging weather conditions, less grocery inflation than expected and the payroll tax increase.
The company’s namesake stores in the U.S. showed a 1.4% decline in same-store sales in the latest period, excluding fuel. Its February forecast was for flat sales.
Same-store sales excluding fuel at its Sam’s Club warehouse shops, meanwhile, edged up 0.2%. Wal-Mart had predicted same-store club sales excluding fuel between flat and up 2%.
Core customers of Wal-Mart generally have been grappling with higher payroll taxes, rising gasoline prices and delayed income-tax refunds. In response, Wal-Mart has made modifications like going with smaller packaging and less expensive products. The retailer also recently announced plans to expand its ecommerce services this summer by placing lockers in stores for customers to pick up items they ordered from the company online.
Despite recent challenges to its core lower-income customers, strong expense-control efforts have helped the company’s margins while increased austerity measures in Europe have benefited international sales.
Ahead of Wal-Mart’s report, analysts at Barclays said they are “impressed with the company’s disciplined expense management” and pointed to Wal-Mart’s “defensive positioning, especially with the macro uncertainty,” and its existing strategies being deployed the U.S. segment to improve same-store sales and traffic as being positives.
On Thursday, Chief Executive Mike Duke pointed to “considerable headwinds to top line sales” and also highlighted ecommerce sales growth of 30% year-over year.
For the quarter, Wal-Mart reported a profit of $3.78 billion, or $1.14 a share, versus $3.74 billion, or $1.09 a share, a year earlier. The company’s February forecast called for earnings of $1.11 to $1.16 a share.
Revenue rose 1% to $114.19 billion, missing the $116.29 billion expected by analysts polled by Thomson Reuters.
International sales rose 2.9% to $33 billion, or 5.4% on a constant currency basis.
Input costs rose 1%.
Looking ahead, the company forecast earnings of $1.22 to $1.27 a share for its current quarter, below the $1.29 per-share profit currently expected by analysts.
Chief Financial Officer Charles Holley said while the company will leverage expenses for the year, the second quarter will be “challenging,” given expense pressures in the international and corporate segments. “Expense leverage may not be delivered evenly across the quarters, but we believe that by executing our plans, we will continue to reduce expenses and improve productivity,” he said.
Earlier this week, Wal-Mart declined to sign on to a legally-binding pact meant to prevent disasters like the Bangladesh building collapse that killed more than 1,100 garment workers last month. Instead the retailer unveiled its own plan for improving safety at Bangladesh garment factories, saying it would hire an outside auditor and require factory owners to renovate when needed or risk being removed from its list of authorized factories.
Shares fell 2% to $78.28 in recent premarket trading. The stock has risen 35% in the past 12 months.