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Tax refund delays hurt Wal-Mart’s U.S. sales

May 15, 2014, 2:03 PM UTC

FORTUNE — Wal-Mart Stores Inc.’s (WMT) U.S. same-store sales slid in the fiscal first quarter, as the retailing giant was stung by tax refund delays and soft demand for electronics and outdoor sporting gear and toys.

It was the fifth consecutive quarter the company failed to report an increase in domestic same-store sales. The retailer’s results have been hurt by the expiration of the payroll tax cut last year, as well as a reduction in food stamps and poor winter weather.

“Sales were pressured primarily by delayed tax refunds, which caused customers to put off discretionary purchases,” said Chief Executive and President Mike Duke.

Total revenue increased 1% to $114.19 billion for the quarter ended April 30. Sales growth was led by a 2.9% increase for Wal-Mart’s international locations, while the retailer’s U.S. stores and Sam’s Club division posted more modest gains. However, same-store sales in the U.S. slid 1.2%, excluding fuel sales. Wal-Mart said those results were hurt by a delay in tax refund checks, poor weather conditions and the payroll tax increase.

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Bill Simon, president of Wal-Mart’s U.S. business, said a $9 billion reduction in Internal Revenue Service estimated tax refunds compared to last year hurt results. Additionally, the 2% increase in payroll taxes, inflation, and unfavorable spring weather hurt sales. Traffic at the retailer’s U.S. stores decreased 1.4%.

Brian Sozzi, a retail analyst and chief executive of Belus Capital Advisors, in a research note said there were “numerous” disappointments in the quarter.

“Traffic continues to be negative, despite investments in price, TV marketing, and social marketing,” Sozzi said. Sozzi said while Wal-Mmart’s traffic troubles are partly due to the poor winter weather, the decline also reflects a change in how consumers are shopping.

Among major product categories, Wal-Mart reported lower domestic same-store sales for hardlines, entertainment, apparel, and home. Most of those categories were hurt by the winter weather, which led to weaker demand for fishing and camping gear, spring toys and bicycles, and spring apparel. Sales in the grocery aisle grew, benefiting from the retailer’s effort to stock fresher produce.

While trends in the U.S. remainder challenging, Wal-Mart has been bullish about a plan to open even more small-store formats, which compete with drugstores and small grocery stores. Online sales have also been a bright spot, with Wal-Mart on Thursday saying e-commerce sales grew 30% in the first quarter.

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Overall, net income for the first quarter climbed to $3.78 billion, or $1.14 a share, from $3.74 billion, or $1.09 a share, a year ago. In February, the company had projected profit for the latest quarter between $1.10 to $1.20 a share.

For the fiscal second quarter, Wal-Mart projected earnings between $1.22 to $1.27 a share, up from the $1.18 profit it reported a year ago.

Paul Trussell, an analyst at Deutsche Bank Securities, told CNBC in an interview Thursday that the company’s second-quarter guidance was disappointing saying the retailer’s investment on price has had a detrimental effect on margins.