Wal-Mart Stores’ (WMT) U.S. shoppers just won’t budge.
The discount chain is still feeling the pinch of shoppers pulling back on trips to its stores and cuts to food stamp programs many of its customers rely on.
Wal-Mart on Thursday reported comparable U.S. sales were unchanged in the three months ended July 31, extending a streak of quarters without growth to six in the key metric, which blends e-commerce with sales at stores open at least a year. (They had actually declined in each of the previous five quarters, if that’s any consolation to the company. And overall U.S. sales grew thanks to new store openings.)
The world’s largest retailer also cut its profit forecast for the year, blaming higher than expected health care costs for employees and saying it would ramp up its spending on its e-commerce capacity.
Despite some bright spots, like solid sales gains at its growing fleet small-format neighborhood stores, improvements in international markets like Canada, Britain and Mexico, and a 24% rise in e-commerce, Wal-Mart again found itself beset with big challenges at home: shopper traffic in the U.S. fell 1.1%, food stamp cuts enacted last year by the U.S. government continued to hurt its grocery sales (which generate more than half of its revenue) and force Wal-Mart to cut prices, and uninspired results at Sam’s Club (which quarter after quarter gets beaten by Costco Wholesale (COST)).
“We wanted to see stronger comps overall in Walmart U.S. and Sam’s Club,” Wal-Mart CEO Doug McMillan said on a pre-recorded conference call. “In an environment where customers have so many choices about where to shop and how to buy, and many of them are feeling pressure on their budgets, we have to be at our best.”
Some 20% of Wal-Mart shoppers rely on food stamps, according to a Cowen study this year. In addition, Wal-Mart is facing intense competition from dollar stores such as Dollar General (DG) and Family Dollar (FDO), which are lowering their prices on all manner of merchandise this year to win those shoppers still pinching pennies in an environment of anemic wage growth.
So Wal-Mart is trying to revive its U.S. sales by accelerating its rollout of small-format neighborhood stores, which reported a 5.6% increase in comparable sales. But there are only 400 of those locations, compared to more than 4,000 supercenters. It is also putting more resources into its e-commerce, which only generates about 3% of sales.
Wal-Mart’s tepid sales growth comes a day after department store chain Macy’s (M) lowered its sales forecast, saying shoppers were holding back on spending in the face of slow economic growth. Retailers from Kate Spade to Family Dollar have said the same thing in recent weeks. Kohl’s (KSS), a mid-tier department store chain, on Thursday reported disappointing comparable sales for the second quarter, posting a 1.3% decline, while Wall Street was projecting a smaller decline of 0.6%.
Overall revenue in the quarter grew rose 2.8% to $119.3 billion, a hair below analyst estimates of $120 billion. But earnings from continuing operations came in at $1.21, in line with analyst estimates. Wal-Mart now expects a profit for the full year of $4.90 to $5.15, down from its previous range of $5.10 to $5.45 per share.