Wal-Mart Stores, Inc. Reports Q4 Earnings, Outlook Cautious

Big box retail giant, Wal-Mart Stores, announced fourth quarter 2014 earnings this morning.  Analysts polled were looking for net income of $1.53 per share on revenue of $132.2 billion.  Wal-Mart beat net income estimates with its reported $1.61 earnings per share, but missed revenue estimates at $131.6 billion. For full fiscal year 2014, Wal-Mart reported diluted earnings per share of $4.85 on revenue of $476.3 billion.  While revenue increased 1.6% from fiscal results in 2013, full year net income results showed a drop of -3.2% year over year. In early market trading Thursday, Wal-Mart is currently trading down -3% to $83.70.

Strong dollar continues to plague earnings

Wal-Mart said that the primary reason for its revenue miss could be thanked majority to the strong US dollar and unfavorable currency exchange rates.  CEO Doug McMillon said he was pleased with the fiscal revenue that his company brought in, but was not satisfied overall with the company’s results.  Additionally, Wal-Mart reported forward guidance, which was a little less optimistic than analysts were hoping for.  Wal-Mart expects fiscal 2015 earnings per share to range between $4.70- $5.05.  Analysts were expecting full year earnings results of $5.19.

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Wal-Mart announces compensation and structural changes to its stores

In addition to announcing earnings, Wal-Mart executives took the opportunity to announce sweeping changes across its US stores.  The company announced that it would raise its minimum wage to $9 an hour with plans set to have wages boosted again next year on February 1, 2016 to $10 an hour.  In addition, Wal-Mart executives said they will be changing how the company hires and trains workers, as well as scheduling and management structure.  The idea here is to give employees a greater say in their work schedules, all the while earning more per hour, maintaining a closer relationship with their supervisors and having a greater focus on job promotion.

Overall, Wal-Mart struggled with fourth quarter revenue, but that could be thanked mostly to currency exchange rates, which have plagued companies throughout the fourth quarter earnings season.  The company’s outlook certainly seems cautious and investors are not pleased, as the stock is seeing a pullback today.  Additionally, its new initiatives and wage increases are said to cost the company an addition $1 billion this year, but it is money well spent when you have happier employees and an easier structure.  Happy employees mean happy customers, Wal-Mart hopes.

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