Wal-Mart Cuts Earnings Views On E-Commerce, Health Costs

Wal-Mart slashed its full-year earnings outlook Thursday as the rollback-pricing retailer continues to invest more in its e-commerce business.

Second-quarter earnings fell 2.4% to $1.21 a share, in line with analysts' forecasts. Revenue increased 2.7% to $120 billion, above views for $119 billion.

In the U.S., Wal-Mart and Sam's Club comparable-store sales were flat. But smaller-format Neighborhood Market stores saw a 5.6% boost.

The flat comp sales ended a streak of five straight quarterly declines, but they will be relatively flat again in Q3, the company said.

"While the guidance was somewhat expected, it's certainly not a positive and indicates a still very challenged U.S. consumer," Cowen & Co. analyst Faye Landes said in a research note published Thursday.

Wal-Mart (WMT) cut its fiscal 2015 earnings estimate to $4.90-$5.15 a share from a previous forecast of $5.10-$5.45 a share due to its e-commerce investments, higher-than-anticipated U.S. healthcare costs, and expansion of its Neighborhood Market stores.

The Wall Street consensus for full-year EPS is $5.16.

Wal-Mart sees Q3 EPS of $1.10-$1.20, with the midpoint below the consensus of $1.18.

Shares edged up 0.5%.

"Our investments in e-commerce and mobile are very important as the lines between digital and physical retail continue to blur," said Wal-Mart CEO Doug McMillon in a statement.

E-commerce sales increased about 24% globally on a constant-currency basis. The U.S., U.K., China and Brazil markets experienced double-digit growth but failed to largely offset mediocre big-box store performance.

But Wal-Mart's focus on e-commerce drags down return on investment and lowers profit margin potential because of shipping costs and having to compete on price with other online retailers like Amazon (AMZN), Jefferies analyst Daniel Binder said in a research note Monday.

Binder also noted Wal-Mart's sales reflect general weakness with its core consumer.

Weak sales are being seen in other retailers. On Thursday, Kohl's (KSS) said Q2 earnings improved slightly, but sales fell. Nordstrom (JWN) missed Q2 sales views, following Macy's (M) sales miss Wednesday, and dropped 4% after hours.

J.C. Penney (JCP) bucked the trend, narrowing its net loss as revenue increased 5%, with both beating views. It rose 3% late.