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Germany Exit, Gas Prices Faulted for Wal-Mart Profit Drop

NEW YORK - Wal-Mart Stores Corp. on Thursday reported a decline in profits for the first time in a decade. The world’s largest retailer said second quarter net income was $2.08 billion or 50 cents a share, a 26 percent drop compared with the $2.8...

NEW YORK – Wal-Mart Stores Corp. on Thursday reported a decline in profits for the first time in a decade. The world’s largest retailer said second quarter net income was $2.08 billion or 50 cents a share, a 26 percent drop compared with the $2.8 billion, or 67 cents in the period a year earlier.

Sales in the quarter ended July 31 totaled $84.5 billion, an 11 percent increase. But the sales came in lower than the $86.2 billion analysts had estimated.

A number of factors negatively impacted Wal-Mart’s results in the second quarter, including the sale of retail operations in Germany; the company took a $863 million charge related to the sale. The sale of the business in South Korea is expected to generate a gain, which will be recorded in the period when the sale closes.

Rising fuel prices was the lament heard round the world, with the impact of rising gas costs felt from ASDA in London to Sam’s Club in Lansing.

Consumers reduced their number of visits to stores and Wal-Mart’s transportation and utility costs grew. “What’s on the mind of the Wal-Mart customer?” said H. Lee Scott, Jr., president and chief executive officer on a morning conference call. “In the United States customers tell us they’re most concerned about gas prices. And this has been consistent every month of this quarter. While we know they’re consolidating their shopping trips, we’re happy to see the growth in our average ticket.”

Excluding the costs of exiting Germany, Wal-Mart earned 72 cents a share in the second quarter, up from 68 cents a share in the prior year quarter.

Scott said he was “quite honestly disappointed in sales performance of Wal-Mart U.S. Some of the same issues affecting our customers such as higher utility costs and gas prices are impacting corporations like Wal-Mart as well.” Same-store sales at U.S. stores grew only 1.7 percent in the second quarter, the smallest increase in six consecutive periods.


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