Wal-Mart flags as gas prices hurt BBC News August 16, 2005 Wal-mart flags as prices hurt
The world's largest retailer, Wal-Mart Stores, has warned that higher oil prices are hurting its profits. Wal-Mart, with 100m US shoppers each week, is considered a bellwether for the US economy. The company reported that its profits grew by 6% in the May-to-July quarter, but said that higher gasoline prices are reducing customer spending. Sales at the retail giant grew by 10% as Wal-Mart customers spent $76.8bn. However, like-for-like sales grew 3.5%. Wal-Mart's international earnings were hit by a restructuring charge of $36m (£19bn) at its UK Asda stores. Wal-Mart did not report separate figures for Asda, but said its profitability was improving after job cuts at its head office. Overall, international profits rose only 0.3%, despite a sales rise of 12%. The strong Canadian dollar and Mexican peso versus the US dollar inflated the value of international sales. Wal-Mart also operates in Argentina, Brazil, China, Japan, Germany, and South Korea. 'Economic concern' Wal-Mart said that the hot July weather had boosted US sales, but warned that the higher oil prices would continue to hit its bottom line in the second half of the year. The higher oil prices also increased Wal-Mart's distribution costs , as it spent an additional $30m on fuel for its huge fleet of trucks which move goods from its warehouses to stores. "The only real economic concern I have is that oil prices will erase improvements in employment and real income for an important segment of our customer base," said Wal-Mart chief executive Lee Scott. Analysts said that they were concerned that Wal-Mart's profits were growing more slowly than sales in its core US stores. Its shares fell by more than 2% on Wall Street after the company said that second half profits would be 55 cents to 59 cents per share, below expectations of 61 cents. "The most surprising thing..was management's more conservative outlook for the rest of the year, driven by the impact of higher oil prices on consumer spending," said Emma Kozloff, an analyst with Sanford Bernstein. -------------------------------------------------------------- Please Note: Due to Florida's very broad public records law, most written communications to or from College employees regarding College business are public records, available to the public and media upon request. Therefore, this e-mail communication may be subject to public disclosure.
