Wal-Mart Stores Inc. said fourth-quarter profit will be at or below the low end of its forecast because of extra costs in Brazil as well as lower food-stamp benefits and winter storms that hurt U.S. sales.
Same-store sales at U.S. stores and the Sam’s Club warehouse division will be less than projected, the Bentonville, Arkansas-based company said today in a statement. Wal-Mart said in November that profit per share in the quarter ending today would be $1.60 to $1.70. Analysts estimated $1.65, on average.
Wal-Mart, already grappling with a holiday season marked by profit-eating discounts that have prompted several chains to cut their forecasts, said the reduction in the U.S. government’s Supplemental Nutrition Assistance Program that went into effect Nov. 1 hurt sales more than expected. The company also faces higher tax liabilities and employment claims in Brazil.
“They’ve lost a lot of their advantage here in the U.S. on pricing,” Scott Mushkin, an analyst at Wolfe Research Securities in New York, said today in a telephone interview. “The international business has not been performing where they hoped or where investors hoped.”
He has the equivalent of a hold rating on the shares.
Wal-Mart, the world’s largest retailer, fell 1.4 percent to $73.69 at 9:49 a.m. in New York. The stock rose 15 percent last year, trailing the 30 percent gain for the Standard & Poor’s 500 Index.
The company, which closed 50 stores in Brazil and China, said non-income tax items in the South American nation will reduce profit in the quarter by 6 cents a share and that employment claims there will cut profit by 5 cents. Wal-Mart has been struggling to grow in Brazil as it works to reintroduce its everyday low price strategy there.
A change in the way Wal-Mart accounts for leases in China will reduce profit by 3 cents a share, and a restructuring at Sam’s Club that included 2,500 job cuts will trim 1 cent from earnings.
The retailer said in October that it would close as many as 30 underperforming stores in China while adding 110 locations there in three years.
Doug McMillon, who led the international business and takes over as chief executive officer tomorrow, said China is “one of the biggest opportunities” for Wal-Mart around the world.
A week ago, Wal-Mart said it would eliminate employees such as assistant managers and phone attendants at Sam’s Club to streamline management at clubs of varying sizes.
U.S. lawmakers allowed a temporary increase in food-stamp benefits that was passed as part of the 2009 economic stimulus package to expire in November. Wal-Mart U.S. CEO Bill Simon said in October that the reduction may actually help the retailer.
“Price will become more important,” Simon said at a meeting with analysts. “And when price is more important, we’re more relevant.”
The company plans to report full fourth-quarter results on Feb. 20.