Wal-Mart's 4Q results to show consumer strain

Wal-Mart's 4Q results likely to show shopper strain after payroll tax increase

Associated Press

NEW YORK (AP) -- Wal-Mart Stores Inc. is expected to show slower revenue growth in the company's U.S. namesake business when it reports fourth-quarter results on Thursday.

WHAT TO WATCH FOR: Wal-Mart's results will be examined for signs about the mindset of shoppers, both in the U.S. and abroad.

Analysts expect Wal-Mart to have enjoyed a decent holiday shopping season, which is included in the fourth-quarter results, as the world's largest retailer plied shoppers with low prices and other enticements like layaway.

But the results may offer more signs of shoppers under financial stress. Concern is mounting about how a 2 percent rise in payroll taxes that started last month, delayed tax refunds and rising gas prices are hurting the retailer's low-income shoppers after a Bloomberg News report included leaked an email from a top executive characterizing the first two weeks of February as "a total disaster."

In response, Wal-Mart spokesman Dave Tovar said, "As with any organization, we often see internal communications that are not entirely accurate, that lack the proper context and represent individual opinions."

Analysts will want to know more details about Wal-Mart's shoppers during the holiday season and the start of the new year. In particular, they'll want to know whether its consumers are having even harder time stretching their dollars to the next payday because of the payroll tax hike, and how that is affecting what they buy.

Analysts expect Wal-Mart to report its sixth consecutive quarterly revenue gain at its namesake U.S. stores open at least a year. That sales figure is a measure of a retailer's health because it excludes results from locations that open and close during the year.

Analysts expect Wal-Mart's namesake U.S. business to post an increase of 1.4 percent in revenue at stores open at least a year for the fourth quarter, according to FactSet. Analysts expect a 1.8 percent increase for its entire U.S. business, including a 2.8 percent rise at Sam's Clubs.

But that growth pace has slowed in recent quarters as it's getting harder for Wal-Mart to lap increases from year-ago gains.

JP Morgan analyst Christopher Horvers estimates that payroll tax increase will equate to $70 per month less in take-home pay, assuming the average annual income for a Wal-Mart customer is $42,500.

Meanwhile, analysts caution not to underestimate the impact from the delay in tax refunds. Citi Investment Research analyst Deborah Weinswig estimated in a report published Sunday that federal tax refunds paid to consumers are down 21.1 percent, or $13.8 billion, through Feb. 13 because the government's didn't start taking returns until Jan.30, with longer delays for certain kinds of returns.

Investors also will want an update on the company's investigation into allegations of bribery in its Mexico operations, which surfaced in late April of 2012. Wal-Mart has launched its own internal investigation and is working with government officials in the U.S. and Mexico.

Last November, the retailer said in a filing with the Securities and Exchange Commission that it was looking into potential U.S. bribery law violations in Brazil, China and India.

Still, investors, who pushed the stock down to around $57 after the allegations surfaced in April 2012, have sent shares up 22 percent since mid-May. Shares fell 2 percent to close at $69.30 on Friday, the day the news report broke about Wal-Mart's February sales.

WHY IT MATTERS: Wal-Mart's results are considered a bellwether of consumer spending because the company draws nearly 10 percent of all nonautomotive retail spending in the U.S.

WHAT'S EXPECTED: Analysts expect earnings of $1.57 per share on net sales of $127.88 billion, according to FactSet.

LAST YEAR'S QUARTER: Wal-Mart earned $1.45 per share on net sales of $122.47 billion, according to FactSet.

Rates

View Comments (6)

Recommended for You

  • Tycoon buys 30 Rolls-Royces for Macau hotel

    A Hong Kong tycoon has placed the biggest ever order for Rolls-Royce cars, agreeing to buy 30 Phantoms to chauffeur guests at a luxury resort he's building in the global gambling capital of Macau. Stephen Hung's $20 million purchase surpasses the 14 Phantoms bought by Hong Kong's Peninsula Hotel in…

    Associated Press
  • Enjoy this refreshing Triple Play offer!

    Get FIOS TV Mundo starting at $79.99/mo. w/ no annual contract + 2-yr. price guarantee. Or sign for 2 yrs. & get a $300 prepaid Visa. Click here.

    AdChoicesVerizon FiOS ®Sponsored
  • Tycoon's arrest sends shock wave through Russia

    Tycoon's arrest sends shock wave through Russia MOSCOW (AP) — The arrest of a Russian telecoms and oil tycoon has sent shock waves through the country's business community, with some fearing a return to the dark days of a decade ago, when the Kremlin asserted its power by imprisoning the country's…

    Associated Press
  • Before You Buy Alibaba, Check Out 4 Top China Stocks

    Before You Buy Alibaba, Check Out 4 Top China Stocks While investors gear up for Alibaba Group 's (BABA) hotly anticipated initial public offering, don't forget about other Chinese stocks that are worth keeping an eye on. Today's Young Guns Screen of

    Investor's Business Daily
  • As Fed takes baby steps, Cramer's trick for profit

    In turn, Cramer says making money in the market, involves looking at the environment through the lens of the Fed. "The trick is to remember that they speak for the common person," Cramer said. "The Fed wants the common person to make money." With that backdrop always in mind, Cramer says it becomes…

    CNBC
  • Costco Stores in Canada to Stop Taking American Express

    “The credit card relationship between American Express and Costco Wholesale Canada will not be renewed when it expires” on Dec. 31, the company said today in an e-mail to Canadian customers. The message was attributed to Lorelle Gilpin, vice president of marketing and membership for Costco…

    Bloomberg
  • "The Retiree Next Door": How successful retirees stretch their savings

    "The Retiree Next Door": How successful retirees stretch their savingsBy the time she hit her late 40s, Toni Eugenia wasn’t sure she would ever be able to retire. Eugenia, 56, a pharmacy technician who lived in Houston, was nearly $200,000 in debt and

    Yahoo Finance
  • CNBC Anchor Calls Out Fed-Hater Bill Fleckenstein In Startling Shouting Match

    CNBC Bill Fleckenstein of Fleckenstein Capital appeared on CNBC's Futures Now program on Tuesday. Futures Now host Jackie DeAngelis came out swinging, asking Fleckenstein right at the top if he was willing to admit that he had misunderstood monetary policy. Sounding taken aback, Fleckenstein…

    Business Insider
  • Norwich Information Security MS

    Online, accredited, top ranked. NSA Center of Academic Excellence. Recognized by the Department of Homeland Security. Download your free brochure!

    AdChoicesNorwich UniversitySponsored
  • Beanie Babies creator's sentence debated in court

    Beanie Babies creator's sentence debated in court CHICAGO (AP) — Federal prosecutors seeking to put the billionaire creator of Beanie Babies in prison for hiding millions in Swiss bank accounts told appellate court judges Wednesday that the toymaker's sentence of probation threatens to erode the…

    Associated Press
  • Apple to unveil new iPads, operating system on Oct. 21 : report

    The company plans to unveil the sixth generation of its iPad and the third edition of the iPad mini, as well as its operating system OS X Yosemite, which has undergone a complete visual overhaul, the Internet news website said. Trudy Muller, a spokeswoman for Apple, declined to comment. The iPad is…

    Reuters
  • Play

    Citi, Bank of America Offer Discounted Mortgages

    Citigroup and Bank of America will offer mortgages at discounted interest rates to help borrowers with low incomes or subprime credit. AnnaMaria Andriotis joins MoneyBeat. Photo: Getty.

    WSJ Live
  • Gilead Stock Is Falling On These Drug Setbacks

    Gilead Stock Is Falling On These Drug Setbacks Gilead Sciences (GILD) shares are backsliding Wednesday on news that the patient drop-out rate for hepatitis C drug Sovaldi is quadruple that of clinical trials. In addition, the biotech's Phase 2 study results

    Investor's Business Daily
  • Margaritaville casino owners seek bankruptcy

    The owner of Biloxi's Margaritaville casino has filed for Chapter 11 bankruptcy protection Tuesday, only hours before a hearing where the landlord aimed to seize the property. The filing by MVB Holding LLC in U.S. Don Dornan, a lawyer for landlord Clay Point LLC, said the company had planned to ask…

    Associated Press
  • Here's What Mark Cuban Wishes He Knew About Money In His 20s

    Cuban is the owner of the Dallas Mavericks basketball team. Billionaire investor and entrepreneur Mark Cuban is generous with his advice. When we asked him what he wishes he'd known about money in his 20s, he said:

    Business Insider
  • Play

    What the Fed Meeting Means for Bonds

    Janet Yellen & Co. are expected to hint at their timetable for raising interest rates. Here's how investors should prepare ahead of the meeting.

    WSJ Live
  • Embraer to sell 50 E-175 jets to Republic in $2.1 billion deal

    Brazil's Embraer SA, the world's third largest commercial planemaker, said on Wednesday it booked a firm order from U.S. The deal, which will be included in Embraer's order book for the third quarter, is valued at $2.1 billion, the planemaker said in a securities filing. The planes will be operated…

    Reuters
  • SHOE COMPANY: Our CEO Just Disappeared And Most Of The Money Is Gone

    "and like that: he's gone." This is an actual headline from a company press release: "CEO and COO disappeared, most of the company's cash missing." (Via FastFT) In a statement, German-based shoe company Ultrasonic said its CFO,  Chi Kwong Clifford Chan, has been unable to reach the company's CEO,…

    Business Insider
  • Billionaire Investor Says Chinese People Work Harder And Western Companies Could Face Deep Trouble After Alibaba IPO

    Michael Moritz, the chairman of VC firm Sequoia Capital, is a huge fan of Chinese internet companies and reiterated his enthusiasm for the Chinese market in an interview with The Wall Street Journal Wednesday. The billionaire investor described the Alibaba IPO as a “major landmark event” that is as…

    Business Insider
  • Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More

    Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More Stocks were firm on Wednesday morning ahead of the FOMC meeting outcome. Tuesday’s rally may have sparked higher interest again, and investors are looking for bargains

    24/7 Wall St.
  • Don't buy Alibaba stock: 'Dean of Valuation'

    Investors should steer clear of Alibaba , valuation expert Aswath Damodaran said Wednesday. On CNBC's " Fast Money ," Damodaran, a professor of finance at New York University's Stern School of Business, noted that he was looking at Alibaba stock from the perspective of a long-term investor, not a…

    CNBC
  • Accomplish your career goals

    At Capella University, you can learn the skills you need to succeed. Why wait another day? Get started today.

    AdChoicesCapella UniversitySponsored
  • 6 Things Debt Collectors Wish You Knew

    The work debt collectors do is not popular, and has become increasingly derided by those who don’t like what we do or simply don’t know the facts about debt collection. Too often, debt collection is painted with a broad brush to create a portrait that isn’t accurate, and doesn’t properly educate…

    Credit.com