Wal-Mart Stores (NYSE:WMT) posted a tepid 1.3% rise in second-quarter profits on Thursday and cut its guidance as the retail leader signaled continued reluctance by consumers to open their wallets on discretionary items.
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Shares of the world’s largest retailer dropped more than 2% in premarket trading in response to the below-consensus outlook.
The report follows negative signals from other retailers in recent days, including department-store operator Macy’s (NYSE:M), which also dimmed its forecast this week.
Wal-Mart said it earned $4.07 billion, or $1.24 a share, last quarter, compared with a profit of $4.02 billion, or $1.18 a share, a year earlier.
Excluding one-time items, it earned $1.25 a share, matching consensus calls from analysts.
Revenue rose 2.3% to $116.95 billion, trailing the Street’s view of $118.47 billion. Same-store sales, excluding fuel, were unchanged in the quarter. Domestic same-store sales dipped 0.3%.
U.S. sales increased 2.1% to $68.73 billion, compared with estimates for $69.34 billion. Overseas sales jumped 2.9% to $32.96 billion, trailing forecasts for $34.14 billion.
Operating margins dipped to 5.8% from 5.9%.
Wal-Mart CEO Mike Duke acknowledged in a statement that "the retail market was challenging across all of our markets."
Looking ahead, Wal-Mart downgraded its 2013 EPS forecast to $5.10 to $5.30, compared with $5.20 to $5.40 previously. Only the high end of that new range would meet expectations on Wall Street for $5.30.
For the current quarter, management forecasted EPS of $1.11 to $1.16, which is below the Street’s view of $1.17.
“The retail environment remains challenging in the U.S. and our international markets, as customers are cautious in their spending,” said Charles Holley, Wal-Mart’s chief financial officer.
Shares of Bentonville, Ark.-based Wal-Mart dropped 2.53% to $74.47 ahead of Thursday's opening bell. The slump threatens to eat into Wal-Mart's 2013 rally of about 12%.