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

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.