Wal-Mart Tops Estimates, but Guidance Is Weak
Wal-Mart Stores reported quarterly earnings Thursday that topped expectations, but guidance for the first quarter came in shy of estimates as higher gas prices and the payroll tax increase cut into consumer spending.
The weakness overshadowed the world's largest retailer's bigger-than-expected profit increase, which was helped by a lower-than-anticipated tax rate. Wal-Mart also said it would raise its fiscal year 2014 dividend to $1.88 share, or an increase of 18 percent.
After the earnings announcement, the company's shares rose slightly in pre-market trading. (Click here to track the company's stock following the earnings report.)
The retailer posted fourth-quarter earnings, excluding items, of 1.67 per share, up from $1.44 a share in the year-earlier period.
Revenue increased to $127.9 billion from $123.17 billion a year ago.
Wall Street analysts had expected the discount retailer to report adjusted earnings of $1.57 per share on $128.77 billion in revenue.
"February sales started slower than planned, due in large part, to the delay in income tax refunds. We began seeing increased tax refund check activity late last week in our stores, resulting in a more normalized weekly sales pattern for this time of the year," Bill Simon, Walmart U.S. president and chief executive officer, said in a statement.
On the company's analyst call, Simon said Wal-Mart had cashed $4 billion in tax refunds and anticipation checks by this time a year ago. This year, it has cashed just $1.7 billion. He added that consumers have also been pressured by rising fuel prices, changes in inflation, and the payroll tax increase.
"The big news came out last week on Friday," Dana Telsey, CEO and chief research officer of Telsey Advisory Group, told CNBC's "Squawk Box," referring to a leaked internal company email, in which an executive called February sales a "total disaster."
She added: "This is basically confirmation and now the settling down of the estimates. People look at the valuation and say what do we see for 2014."
Telsey said her target on the stock overall was around $80 a share.
For the fourth quarter, Walmart U.S. saw same-store sales increase 1 percent, gaining market share in food, consumables, health & wellness, as well as the entertainment categories and toys, the company said. A year earlier, Walmart U.S. same-store sales rose 1.5 percent.
Wal-Mart doesn't normally break down a quarter, but it did for the holiday season. The company said that in the U.S. the holiday season kicked off with strong Thanksgiving and Black Friday sales. Cyber Monday was also Walmart.com's highest sales day ever.
The company noted, however, that the "first three weeks of December were soft, given our Black Friday success and the additional shopping days this year, but we rebounded with double-digit positive comps the week of Christmas, and continued with strength into the first part of January. "
Wal-Mart's effective tax rate for the fourth quarter was 27.7 percent, lower than expected 32.5 percent to 33.5 percent, and below 30.9 percent for the year-earlier quarter. Net interest expense was also lower by 9.8 percent, the company said, "primarily from revisions to various interest accruals related to U.S. and international tax matters."
Wal-Mart said it expects to earn between $1.11 and $1.16 a share in the first-quarter, which is lower than analysts' forecasts. According to Thomson Reuters, the average analyst forecast for first-quarter earnings was $1.18 a share.
Wal-Mart projected its full-year earnings in the range of $5.20 to $5.40 a share, compared with an estimate of $5.37 a share.
The retailer spent $157 million last year on its own probe of alleged bribery allegations in Mexico, Brazil, China and India. A New York Times article in April 2012 unveiled alleged bribery at the major Mexican unit.
The company said its forecast includes about $40 million to $45 million in first-quarter costs related to foreign corrupt practices act and compliance matters.
Wal-Mart said its fiscal year 2014 dividend would be $1.88 per share, up from $1.59 per share in fiscal 2013.
—Reuters contributed to this article.