WALMART INC. (Reuters) - Wal-Mart Stores Inc (>> Wal-Mart Stores, Inc.) cut its annual sales forecast on Wednesday, citing a stronger dollar and the impact of food stamp reductions, and it said it would slow store openings in the next financial year as it shifts spending to its online business.
The announcements, made at an annual gathering of analysts and investors, highlight how the financial struggles of its core customer base - low-income consumers - continue to weigh on its earnings and have prompted a more cautious stance on traditional bricks-and-mortar expansion.
The world's largest retailer, which recorded $473.1 billion in sales in its last financial year, said it now expects sales to rise 2 to 3 percent in the current year to Jan. 31, 2015. It had previously put growth at the low end of a 3 to 5 percent range.
Wal-Mart stock fell 3.6 percent to close at $75.2
The lower sales outlook marks the second time in two months that Wal-Mart has surprised investors by underestimating a cost impact. In August, it cut its earnings guidance due to higher enrollments in its health care plan.
Wal-Mart pinned the latest revision on a stronger dollar, which cuts into the value of its overseas sales, and the reduction in food stamp benefits in November 2013, which hit the shopping budgets of many of its customers.
Wal-Mart has posted six straight quarters of flat or declining growth in same-store sales, and the lower sales forecast suggests a recovery could take longer than anticipated. The company did not provide a timetable for a pickup in growth.
In another sign of its cautious view on the U.S. market, the company said it would slow store openings in the next financial year. Including conversions, it plans to open 60 to 70 Supercenters, its large-format stores that contain full-sized supermarkets, down from 115 this year. It plans to open 180 to 200 of its smaller format stores next year, compared with a rollout of 270 to 300 in the current year.
The cautious stance makes sense given the slow economy and with its core customers facing hard times financially, said J. Dowe Bynum of Cook & Bynu Capital Management, a fund based in Alabama that owns Wal-Mart shares.
"They want to be careful and thoughtful about that build out. They have the financial wherewithal to ramp it up when the economy is stronger and can absorb it."
Chief Executive Douglas McMillon said the move was part of a pivot toward ecommerce, an area in which it is growing rapidly but is still playing catch-up with Amazon.com Inc (>> Amazon.com, Inc.). McMillon said the ultimate winners in online would be those players that could also leverage traditional stores.
"We've done the harder part," McMillion said, a nod to Wal-Mart's global network of more than 11,000 stores.
Wal-Mart said it expected moderate growth in the next financial year to January 2016 as well, with sales to expand by 2 to 4 percent and operating income increasing at the same rate or slower.
That company said it would increase investment in e-commerce and digital operations by up to $500 million from $1 billion this year, including the building of two new fulfillment centers in the United States.
Wal-Mart is not the only retailer to stumble on hard times.
Government data on Wednesday showed that U.S. retail sales declined in September as consumers pulled back on spending for a range of items. EBay Inc (>> eBay Inc) also trimmed its full-year revenue forecast on Wednesday.
Wal-Mart acknowledged that some of problems were self-inflicted. McMillon said there was "room to improve" at many of its stores, including better checkout and stocking of shelves, two problems that have plagued the retailer in recent years.
Greg Foran, who recently took over as head of the U.S. business, said inventory was growing at twice the rate of sales and needed to be managed more efficiently.
(Reporting by Nathan Layne in Rogers, Arkansas; Siddharth Cavale and Devika Krishna Kumar in Bangalore; Editing by Kirti Pandey, Peter Galloway and Cynthia Osterman)
By Nathan Layne
