NEW YORK (AP) — Wal-Mart is spending billions of dollars to pay its hourly workers more and spruce up its stores and online services. But its fourth-quarter results show that it'll take time to fix its business.
The world's largest retailer's adjusted fourth-quarter results beat Wall Street estimates. But profit fell 8 percent as the company faces higher costs.
Wal-Mart also reported a revenue shortfall for the quarter and lowered its annual sales forecast because of the negative impact of a strong U.S. dollar and the company's move to close some stores globally. And even though Wal-Mart reported its sixth straight increase in sales at established stores in the U.S., that pace marked a slowdown from the third-quarter.
Even online sales have been losing steam. During the fourth-quarter, global e-commerce rose 8 percent, well below the 20 percent pace just a few years ago.
The results sent Wal-Mart shares down more than 4 percent.
"Overall, the results were somewhat underwhelming, and suggest the road to improvement for Wal-Mart is going be drawn out," Michael Lasser, analyst at UBS, wrote in a report published Thursday.
Wal-Mart faces pressure on all fronts. Its low-income shoppers remain cautious. Wal-Mart also faces increasing competition from online leader Amazon.com, dollar stores and traditional grocers like Kroger, all of which are pushing lower prices and convenience.
Wal-Mart says shoppers are benefiting from lower gas prices, but it's now battling deflation in key areas like meat and dairy products. And delays in tax refund checks from the U.S. Internal Revenue Service hurt business late in the fourth quarter.
Wal-Mart is making lots of changes that it says will help it stay competitive in a changing retail landscape. It's spending $2.7 billion on higher wages and other investments for its hourly workers over a two-year period.
It has also stepped up its investment online and in the stores. It's better stocking shelves and is improving the fresh areas of its stores, which are crucial to driving traffic. And it's expanding online grocery shopping to more than 150 locations across more than 20 markets in the U.S.
But those moves have squeezed profits. Annual profits this year are expected to fall as much as 12 percent.
The company is also pruning its global foot print. Last month, Wal-Mart announced it was closing 269 stores, including 154 in the U.S. The closings are part of the company's overall review of its operations to make it more nimble to better compete with rivals.
Wal-Mart said revenue at stores opened at least a year for its Wal-Mart U.S. division rose 0.6 percent, its sixth straight increase, but that pace slowed from 1.5 percent increase in the third quarter. Customer counts are up for the fifth straight quarterly period.
During the holiday season, Wal-Mart made a concerted effort to pull back on temporary promotions and focus on its "everyday low prices," its bedrock price strategy.
"We are seeing momentum in our Wal-Mart U.S. business," said Doug McMillon, president and CEO of Wal-Mart in a statement. But he added, "We've still got a lot of work to do."
Wal-Mart, based in Bentonville, Arkansas, earned $4.57 billion, or $1.43 per share in the three-month period ended Jan. 31. That compares with $4.97 billion, or $1.53 per share, in the year ago period.
On an adjusted basis, the figure was $1.49, higher than the $1.46 per share estimated by FactSet.
Net revenue was $128.6 billion. That's slightly lower than the expected $130.5 billion, according to FactSet. However, revenue on a constant currency basis was up 2.2 percent to $134.4 billion. A strong U.S. dollar hurts the value of revenue generated overseas.
The company now said it expects total sales for the year to be flat, down from its earlier forecast for a 3 percent to four percent growth.
During a call with reporters Thursday, Neil Ashe, president and CEO of Global e-commerce, noted global online sales continue to be dampened by weakness in Brazil, China and the United Kingdom amid economic and competitive challenges. But he noted that in the U.S., the online sales pace has been at or above the overall industry increase.
Greg Foran, president of Wal-Mart's U.S. business, told reporters on the call that investments in its workers are crucial to improving the customer experience at the stores and should continue to drive sales.
"It's been a steady year. We've been raising the bar higher," he said.
Shares fell $2.73 to $63.238 in mid-day trading.
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