Wal-Mart sputters, other retailers shine
NEW YORK – Wal-Mart Stores Inc. struggled in the second quarter and muted its earnings outlook on Tuesday, again blaming higher gasoline prices for curbing the spending plans of its low-income shoppers. In contrast, shoppers at moderate-price department store retailer J.C. Penney Co. Inc. and at upscale Nordstrom Inc. focused on fashion rather than fuel, resulting in strong results and an upbeat outlook.
Meanwhile, teen retailer Abercrombie & Fitch Co. posted big profit gains in the second quarter, though results missed analysts’ forecasts. The company raised its outlook for the year.
Wal-Mart posted a 5.8 percent gain in second-quarter profits, beating Wall Street projections, but the results marked the smallest percentage gain in four years. The world’s largest retailer’s revenues fell short of projections. Penney recorded a sharp increase in profits, boosted by strong sales of merchandise across all divisions, and said that annual profits would surpass Wall Street expectations.
Nordstrom had a 39 percent increase in profits, beating analysts’ estimates. The company upgraded its profit for the year.
Abercrombie & Fitch enjoyed a 35 percent increase in second-quarter profits from a year ago, helped by strong sales of denim and knit fashions.
The disappointing results from Wal-Mart offer further evidence that the discounter can’t rely on the lowest prices to fuel sales and profit growth as rivals like Target Corp. and Penney, both of which appeal to a higher-income shopper, keep sharpening their merchandising assortment. While Wal-Mart began to expand into trendier apparel and home fashions this year to make itself less vulnerable to the economy’s jitters, the question is whether it can lure shoppers fast enough to turn business around.
“They have to keep up because the competition is offering more interesting merchandise,” said Philip M. Zahn, retail analyst at Fitch Ratings.
For the three months ended July 31, Bentonville, Ark.-based Wal-Mart earned $2.8 billion, or 67 cents per share, up from $2.65 billion, or 62 cents per share, in the year-ago period. Wal-Mart reported sales of $76.8 billion for the three months ending July 31, up 10.2 percent. Analysts expected a profit of 65 cents per share and revenue of $77.46 billion.
Wal-Mart Chief Executive Lee Scott blamed high gasoline prices for the company’s shortfall. Scott said a cool and wet spring got the quarter off to a slow start but summer came in stronger than forecast.
Sales in stores open at least a year, known as same-store sales, rose 3.5 percent for the quarter at U.S. stores – 3.6 percent in the Wal-Mart division and 2.9 percent at Sam’s Club warehouse stores. The company projected same-store sales gains in the third quarter of between 3 percent and 5 percent.