By Sarah Nassauer And Chelsey Dulaney
Wal-Mart Stores Inc. kept its short streak of improving U.S.
sales alive, but the cost of higher wages and the strong dollar
pushed its profit down.
The slim gain in U.S. sales for the first three months of the
fiscal year was the third straight for the world's biggest
retailer, whose new chief executive, Doug McMillon, has focused on
stopping a long slide in its home market. Wal-Mart drew more
shoppers to its stores for the second straight quarter, and they
spent just a hair more than a year earlier.
The value of the company's international sales was hurt by the
stronger dollar, causing overall sales to fall.
Mr. McMillon acknowledged Tuesday that the company had room to
improve, saying on an earnings call that "we're not where we want
to be in every store."
In all, Wal-Mart said its profit fell 7% to $3.34 billion, as
revenue fell 0.1% to $114.8 billion. Shares fell 3.6% in morning
trading.
The results, while a sign of some progress for Wal-Mart, marked
yet another lackluster showing for retailers amid concerns the
economy hit a soft patch at the beginning of the year. Department
stores like Macy's Inc. reported soft sales, and government data
for overall retail sales has often been flat or down in recent
months.
"We know that many of our U.S. customers are using their tax
refunds and the extra money from lower gas prices to pay down debt
or put it into savings," Mr. McMillon said on the earnings call.
"They're also using these funds for everyday expenses," he
said.
A year ago, Wal-Mart was struggling with flat or falling sales
in the U.S., but the company notched two quarters of gains at the
end of last year, helped by operational improvements, lower gas
prices and falling unemployment.
In the latest quarter, U.S. same-store sales edged up 1.1%,
excluding fuel, below analysts' estimates of a 1.5% increase.
To turn around its struggling domestic business, Wal-Mart is
working to improve store operations like offering fresher produce
and better customer service, which the company acknowledges had
hurt sales in recent years, while pushing suppliers to deliver ever
cheaper prices.
It also is investing in its online business and announced
earlier this year that it would raise the minimum wage paid to
employees--moves that ate into its profits.
Online sales grew by about 17%, much faster than overall sales,
but a slower rate than in the past two years.
For the current quarter, Wal-Mart forecast earnings of $1.06 to
$1.18 a share. Analysts polled by Thomson Reuters had forecast
$1.17 a share in earnings.
Write to Sarah Nassauer at sarah.nassauer@wsj.com and Chelsey
Dulaney at Chelsey.Dulaney@wsj.com
Corrections & Amplifications
An earlier version misstated the percentage decline in total
revenue in the latest quarter.
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