A sour economic signal: Wal-Mart misses expectations, cuts outlook

Wal-Mart Stores Inc., the world’s largest retailer, cut its outlook for the rest of the year after reporting second-quarter earnings that fell below expectations.

The disappointing performance, coupled with pessimistic forecasts from Macy’s Inc. and Kohl’s Corp. this week, seems to indicate that Americans are stuck in an economic holding pattern, analysts said.

“The retail environment remains challenging in the U.S. and our international markets, as customers are cautious in their spending,” said Chief Financial Officer Charles Holley in a statement.

Wall Street had expected Wal-Mart to earn profit of $1.25 a share and $118.1 billion in revenue. Instead, the discount giant said net income rose 13% to $4.07 billion, or $1.24 a share, from $4.02 billion, or $1.18 a share.

Revenue, excluding membership fees, increased 2.4% to $116.2 billion. Same-store sales, including Sam’s Club and the international division, were flat, an improvement from the 1.2% slump the previous quarter but still lagging expectations for a 1% gain.

In the U.S., same-store sales at Wal-Mart slumped 0.3% in the second consecutive dip following six months of upticks. In the first quarter, the gauge fell 1.4%.

The Bentonville, Ark., retailer now says it anticipates an overall sales increase of 2% to 3% for the full year after earlier predicting a 5% to 6% swell. The company also lowered its projections for profit to a $5.10 to $5.30-a-share range from the previous forecast of $5.20 to $5.40 a share.

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The earnings results “raise further concerns about the health and state of the lower and middle income consumer,” wrote analyst Ken Perkins in a note from Retail Metrics Inc.

“While the jobs market has improved, wage gains have been marginal at best and many of the new jobs have either been part-time or in low paying service sectors,” he wrote.

On Thursday, Kohl’s reported second-quarter earnings that were in line with expectations, a day after Macy’s said it suffered its first earnings miss in six years.

Kohl’s said it earned $231 million, or $1.04 a share. Revenue increased 2% to $4.3 billion, while same-store sales were up 0.9%.

The retailer also dropped the top end of its annual guidance from $4.45 a share to $4.35.

In late-morning trading in New York, Kohl’s stock was up 5.5%, or $2.79 a share, to $53.63 a share, likely because investors had expected a more dire earnings report.

Wal-Mart, however, was suffering. The company was trading down 2%, or $1.65 a share, at $74.75 a share.

The Dow was down 1.4%, or more than 200 points, to 15,124.

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Follow Tiffany Hsu on Twitter at @tiffhsulatimes