WMT Walmart Inc

By Chelsey Dulaney 

Wal-Mart Stores Inc. on Tuesday cut its earnings guidance for the year and gave a soft outlook for the current quarter as wage increases and investments in its struggling U.S. business pressure profit at the world's largest retailer.

Shares of Wal-Mart, down 16% this year, fell 2.9% in premarket trading.

"Even if it's not as fast as we would like, the fundamentals of serving our customers are consistently improving," said Chief Executive Doug McMillon in a news release. "In this case, our desired changes require investments, which are pressuring earnings this year."

For the year, the company is now expecting earnings of $4.40 to $4.70 a share, down from its previous forecast for $4.70 to $5.05 a share.

Wal-Mart said it expects currency fluctuations to bring down earnings by 15 cents a share, compared with its prior forecast of 13 cents a share, while reduced pharmacy reimbursement rates are expected to weigh on its U.S. margins.

For the current quarter, Wal-Mart forecast earnings of 93 cents to $1.05 a share. Analysts polled by Thomson Reuters had forecast $1.08 a share.

Meanwhile, Wal-Mart kept its streak of improvement at its U.S. stores alive in the second fiscal quarter.

Wal-Mart posted a 1.5% increase in U.S. same-store sales, above the company's expectation for 1% growth. The company has now notched four straight quarters of sales growth in the U.S. as the company has moved to improve store operations by offering fresher produce and better customer service.

Traffic at U.S. stores grew 1.3%, the third straight increase in the metric after a long period of declines.

Still, profit continued to be dented by costly investments in wages and e-commerce. Foreign currency movement also ate into profits to the tune of four cents a share.

In all for the period ended July 31, Wal-Mart said profit fell to $3.48 billion,, or $1.08 a share, from $4.09 billion, or $1.26 a share, a year earlier. Wal-Mart had forecast $1.06 to $1.18 a share in earnings.

Revenue edged up slightly to $120.2 billion from $120.1 billion a year earlier. Analysts had forecast $119.7 billion, according to Thomson Reuters.

Excluding currency fluctuations, revenue grew 3.6%.

Online sales, excluding currency impacts, grew 16% in the quarter.

Wal-Mart has focused recently on building more small-format Neighborhood Markets. Those stores posted a 7.3% increase in sales in the quarter amid strong growth at new stores.

At Sam's Club stores, sales grew 1.3% excluding the impact of fuel. Sam's Club is attempting to break away from the low-income consumers who shop at its parent after years of sluggish sales. Including the impact of fuel, sales slipped 2.3%.

Wal-Mart's results add to a string of weak reports from retailers in recent weeks. Department store retailers Macy's Inc. and Kohl's Corp. both reported tepid second-quarter sales this month, even as the U.S. consumer seems to be spending more freely.

U.S. consumer spending on items outside of cars--such as clothes, furniture, building supplies and other everyday items--rose 0.4% in July, the third consecutive month of solid gains.

Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com

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(END) Dow Jones Newswires

August 18, 2015 08:05 ET (12:05 GMT)

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