outlook for the year
Wal-Mart reported a 5.7 percent increase in second-quarter net income and raised its outlook for the year as the world’s largest retailer continues to woo back frugal shoppers by reemphasizing that it has the lowest prices on everything from clothes to electronics.
But Wal-Mart said Thursday that its total revenue came in short of Wall Street estimates, and the discounter announced that it would delay store expansion plans in Mexico, its largest international division, as it deals with bribery charges there. Investors, who had sent the stock up 25 percent since mid-May, pushed shares down more than 3 percent on the news.
Wal-Mart is considered an economic bellwether because it accounts for nearly 10 percent of non-automotive retail spending in the United States. The company said its customers are still being squeezed by economic problems in the United States and abroad.
Still, Wal-Mart’s results offer optimism that the company’s U.S. business has turned a corner. Wal-Mart, which thrived during the U.S. recession as more well-off people started shopping at its stores, had begun to struggle as its lower-income customers were hit hard by joblessness and other challenges in a slow economic recovery.
Adding to that, Wal-Mart’s U.S. stores, which account for 60 percent of the company’s revenue, had turned off shoppers by veering away from an “everyday low prices” strategy and focusing more on temporarily slashing prices on select items. It also got rid of popular merchandise in an effort to de-clutter the stores.
Wal-Mart last year began adding back 10,000 products and refocusing on keeping prices low throughout its stores. It has done that by cutting expenses and passing some of the savings on to customers. As a result, revenue at Wal-Mart’s U.S. division rose 3.8 percent to $67.4 billion in the latest quarter.
— Associated Press
Also in Business
l Ex-Morgan Stanley real estate executive Garth Peterson was sentenced to nine months in prison for transferring multimillion-dollar interests in a Shanghai building from his employer to himself and a Chinese official. Peterson, 43, was sentenced Thursday by U.S. District Judge Jack Weinstein in Brooklyn for conspiring to circumvent internal bank controls required under the Foreign Corrupt Practices Act. He faced as much as five years in prison. A former managing director at the bank’s Shanghai real estate office, Peterson in 2006 arranged to sell an interest in a building held by Morgan Stanley to a shell company owned by him, a Chinese official and a Canadian lawyer, the government alleged. Peterson told the bank that the shell company was affiliated with a state-owned development firm, Shanghai Yongye Enterprise (Group), the government said.
l Macy’s is suing rival retailer J.C. Penney, claiming that Penney’s bid to sell products by Martha Stewart Living breached an exclusive contract held by Macy’s and could cost it potentially billions in sales. Macy’s filed the lawsuit Thursday in New York’s Supreme Court. In the complaint, Macy’s claimed that Penney entered into an unlawful contract with Martha Stewart Living to sell some of its home products at its stores starting next February.
l Dollar Tree, the discount retailer, said Thursday that its net income increased nearly 26 percent in the second quarter as consumers spent more at its stores that sell goods for $1 or less. Dollar stores, which offer a wide variety of products from beach toys to vitamins, have done well throughout the recession and its aftermath, attracting budget-conscious customers with low prices. The stores also promoted themselves as easy to navigate and easy to get to, because they’re much smaller than big-box stores such as Wal-Mart and Target and usually have more locations throughout any given city.
l Gap reported a 29 percent increase in second-quarter net income as the fashion retailer’s moves to liven up its clothing are attracting shoppers back to the stores. Gap, which operates stores under its namesake, Old Navy, Banana Republic and Athleta, also raised its full-year profit guidance Thursday, though it was below what analysts had expected. The company, based in San Francisco, has struggled for years to reclaim its fashion status. But the latest results offer more confidence that a comeback, started in the first quarter, is taking hold. The company has stepped up its marketing and this spring and summer pushed trendy clothing such as brightly colored jeans.
l Sears Holdings’ push to turn around its ailing business is showing early signs of paying off, even as the retailer failed to stem declining sales. The Hoffman Estates, Ill.-based company said Thursday that aggressive cost-cutting and reduced inventory levels helped narrow its loss in the second quarter from a year ago, with results coming in line with Wall Street expectations. In the United States, the company said revenue from Sears stores open at least a year fell 2.9 percent.
— From news services
l 9:55 a.m.: Consumer sentiment for August released.
l 10 a.m.: Leading indicators for July released.
l Earnings: Foot Locker, JM Smucker.