Cloudy outlook sends Wal-Mart shares down

  • Article by: ANNE D'INNOCENZIO
  • A ssociated Press
  • November 15, 2012 - 7:47 PM

NEW YORK - Wal-Mart Stores Inc. reported a 9 percent increase in net income for the third quarter, but revenue for the world's largest retailer fell below Wall Street forecasts as its low-income shoppers continue to grapple with an uncertain economy.

The discounter issued a fourth-quarter profit outlook that fell short of Wall Street expectations, and the company's stock price slid nearly 4 percent.

Wal-Mart is considered an economic bellwether because the retailer accounts for nearly 10 percent of nonautomotive retail spending in the U.S. The company's latest results show that many low-income Americans -- it's estimated that the typical Wal-Mart customer has an average household income of between $30,000 and $60,000, rents their home and doesn't own stock -- continue to struggle even as the housing and stock markets are improving.

Deeper discounts planned

The disappointing revenue comes as Wal-Mart, like other retailers, is preparing for the busy winter holiday shopping season in the U.S. next week. The period, which runs roughly from November throughout December, is a time when stores can make up to 40 percent of their annual revenue. Wal-Mart has said that it plans to offer deeper discounts and a broader assortment of merchandise during this year's season to draw in shoppers.

"Macroeconomic conditions continue to pressure our customers," said Charles Holley, Wal-Mart's chief financial officer. "The holiday season is predicted to be very competitive, but we are well prepared to deliver on the value and low prices our customers expect."

Ken Perkins, president of Retail Metrics, a research company, said Wal-Mart's revenue is headed in the right direction. But he cautioned that the company will need to continue to keep prices low in order to compete with rivals that have stepped up discounting.

"Overall, it's a relatively good report," he said. "But it shows that its consumer is still struggling."

In the third quarter, Bentonville, Ark.-based Wal-Mart earned $3.63 billion, or $1.08 per share. That compares with $3.33 billion, or 96 cents per share, in the year-ago period.

Net revenue, excluding Sam's Club membership fees, rose 3.4 percent to $113.2 million. Excluding the currency impact, net revenue would have been $114.9 million. Analysts were expecting $1.07 per share on net revenue of $114 billion.

On Thursday, Wal-Mart's stock fell $2.59 to close at $68.72 Thursday. Over the past 52 weeks, Wal-Mart stock has been trading between $56.26 and $77.60.

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