After Walmart (WMT, Financial) reported its first-quarter earnings shares fell 2.25% in pre-market trading and another 3.4% after the market open on Wednesday. The company reported lower sales than expected but saw an increase in store traffic during the quarter. Walmart reported net income of $1.03/share on revenues of $114 billion. Wall Street analysts expected net income of $1.05/share on revenues of $115.6 billion. Aside from missing Wall Streets estimates, the firm results were lower then the first quarter of 2014. The company's executives blamed currency risk, higher wages and higher investments for the firm's lower then expected results.
Key stats
- First quarter diluted earnings per share (NYSEARCA:EPS) from continuing operations was $1.03, within guidance of $0.95 to $1.10.
- Strengthening of U.S. dollar negatively affected EPS by approximately $0.03 per share.
- Walmart's U.S. stores saw a positive store traffic of 1.1% for the quarter.
- The company consolidated operating income declined by 8.3%, due to the impact of currency fluctuations and investments wages and e-commerce.
Rising cost
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In February of 2015, Walmart announced that it would raise its minimum wage of all its employees to $9 and then raise it to $10 next year. By increasing the minimum wage, Walmart believes that it will lower the cost of employee turnover. The company's U.S. stores that have been open for over a year saw same-store sales increase 1.1%. But, however, Walmart's Sam's Club saw same-store sales fall 3.8%, despite lower gas prices. The company's international sales were hurt by a stronger dollar, causing overall sales to fall. In all Walmart's profits fell 7% to $3.34 billion, as revenues fell 0.1% to $114 billion.
During Walmart's earning call CEO Carl Douglas McMillion said, "We know that many of our U.S. customers are using their tax refunds and extra money from lower gas prices to pay down debt or put money into savings." He went on to say, "They're also using these funds for everyday expenses."
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Walmart takes on Amazon Prime
The company is starting to test unlimited free shipping service for the summer. Walmart's new unlimited free shipping service will cost $50 per member. The service will cost half what Amazon Prime cost and deliver within three days.
Walmart spokesperson Ravi Jariwala said, "It's the latest in Walmart's moves to become an online shopping powerhouse as more consumers turn to the Web and smartphones to complete everyday task." He went on to say, "We've heard from customers that they want shipping that's predictable and they want it to be affordable."
The company currently offers free shipping on online orders of at least $50, or customers can order online and pick it up in the store for free. Walmart's unlimited free shipping service test will be done over the summer.
