The world’s largest retailer, Wal-Mart Stores, Inc. (NYSE:WMT), reported an increase of 5.7 percent in net income for the second-quarter. The retail giant has been resorting to doubling down on low prices to attract the frugal shoppers.
The net income for the discounter stood at $4.02 billion, or $1.19 per share, for the quarter ending July 31, against $3.80 billion, or $1.09 per share, a year ago. Revenues for the period, excluding membership fees at Sam’s Club, rose 4.5 percent to $113.53 billion, but were below analyst estimates of $114.63 billion. One encouraging sign was its international business, with focus on Brazil and China, which produces more than a quarter of its revenue, and reported an increase of 6.4 percent to $32.01 billion for the period. However, the recent allegations of bribery in its Mexico operations, could cramp its international business, Wal-Mart’s fastest-growing division.
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It’s been tough times for the retailer, as its core customers’ mainly low income groups, are struggling due to joblessness and other challenges in the down economy. In addition, company also tried to move away from its strategy of “everyday low prices” and has been getting rid of popular merchandise in its US stores, which contribute almost 60 percent to the revenue. After realizing this was a wrong move, Wal-Mart Stores, Inc. (NYSE:WMT) added 10,000 products last year and moved back to keeping prices low throughout the store, which helped the revenue for its US division to increase 3.8 percent to $67.35 billion. Also an important indicator of health is revenue from stores opened at least a year, as it excludes the impact from stores that open and close during the year. Revenues from such stores rose 2.2 percent, beating the 2.1 percent Wall Street estimate. The 2.2 percent gain was commendable, as it came after nine straight quarters of declines. For the US, revenues from stores opened at least a year rose 2.5 percent, including a 4.7 percent increase at the company’s Sam’s Club warehouses.
“Given continuing economic pressures, we believe that our price leadership and value are growing in importance to customers across income levels,” Mike Duke, Wal-Mart’s president and CEO, said in a statement.
With expectations of increase in consumer spending in the coming months, Wal-Mart Stores, Inc. (NYSE:WMT) raised its full-year profit outlook. The retailer now expects earnings per share to be in the range of $4.83 to $4.93, against the original forecast of $4.72 to $4.92 per share.
The world’s largest retailer’s report card, which draws nearly 10 percent of nonautomotive retail spending in the U.S., certainly highlights the pattern in consumer spending, indicating that low-income shoppers are willing to buy only if prices are at rock-bottom.