Tough times at Walmart

It’s not going to be a good year for Walmart.

Shares of the nation’s largest retailer tumbled about 5% in early trading after the company lowered its full-year sales forecast. The company also posted a drop in fourth-quarter and full-year earnings, although both came in better than expected by Wall Street. The problem: Walmart is closing stores and taking a hit from the strong dollar.

A strong U.S. currency is a double-edged sword for the company. It makes the goods it buys overseas less expensive, but it also makes the foreign currency it collects from overseas sales less valuable.

Walmart said the strong dollar alone will cost it about $12 billion in sales and cut profits by $300 million on an annual basis.

Walmart also plans to close 269 stores around the world, 154 of which are in the U.S., which will further reduce sales.

As a result, Walmart (WMT) said its sales would be essentially unchanged for the fiscal year ending in January 2017. It said it would have hit its earlier target of 3% to 4% growth without the currency hit and impact of store closings.

Lower gas prices are helping Walmart customers, but most of them aren’t spending the money they save on gas, said spokesman Randy Hargrove. Sales at the Sam’s Club unit, which sells gas, were little changed in the quarter when excluding gas sales, but down 2% when gas was included thanks to lower prices at the pump. That suggests that Sam’s Club shoppers didn’t spend their gas savings at the store.

The company also raised wages of most of its U.S. workers last year, and is about to issue a second round of wage increases this Saturday. The latest move will take the minimum pay at its U.S. stores to $10 an hour from $9 an hour. It also changed policies on scheduling and paid time off. Those changes cost the company an additional $1.2 billion last year, and will cost it an additional $1.5 billion in the current fiscal year.

 

[Source:- Money.CNN]