Tuesday, August 19, 2014

Health Care Costs and Sluggish Consumer Spending Hit Wal-Mart

The world's largest retailer is having a hard time returning to growth and doesn't expect sales to improve in the U.S. for much of the rest of the year.
Wal-Mart Stores Inc. cut its earnings guidance for the year after it posted its seventh straight quarterly decline in U.S. store traffic and said growth in online sales would slow. It cited sluggish consumer spending and higher costs associated with building new smaller-format stores, increased health-care expenses, and greater investments in its e-commerce operations.
Sales excluding newly opened or closed stores in the U.S. were flat. That was a mild improvement after five straight quarters of declines, but nevertheless underscored the challenges facing a division that made up 60% of the retail company's $476 billion in revenue last year yet hasn't recorded positive comparable-store sales since 2012.
"We wanted to see stronger comps in Wal-Mart U.S. and Sam's Club," Chief Executive Doug McMillon said. "Stronger sales in the U.S. businesses would've also helped our profit performance."
[...]
One unexpected headwind came from health care, where costs are rising quickly as more Wal-Mart employees sign up for coverage.
The company said it now expects to shell out an additional $500 million in health-care expenses related to increased employee enrollment and higher costs, up from the $330 million in increases it first expected.
"Health-care costs increased approximately $180 million versus last year and were well above our initial estimates," said Wal-Mart U.S. CEO Greg Foran, who stepped into the role this week following the departure of Mr. Simon.
Read the full story HERE.

If you like what you see, please "Like" us on Facebook either here or here. Please follow us on Twitter here.


No comments: