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Wal-Mart declines on revised profit forecast

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Wal-Mart declines on revised profit forecast

Wal-Mart (NYSE:WMT) , the world’s largest retailer, was forced to trim its annual profit forecast after reporting on weaker-than-expected second quarter sales. US sales fell 0.3 percent in the quarter ended July 26, well below expectations for a 0.9 percent gain. Despite the recent surge in US employment, low income consumers are struggling to make ends meet; their reluctance to buy more than the bare necessities impacted Wal-Mart’s bottom line, forcing the Bentonville, Arkansas-based retailer to revise its forecast for the year ending January 2014.

Wal-Mart said per share earnings for the year ending in January will be between $5.10 and $5.30, lower than initial forecasts which called for per share earnings in the region of $5.20 and $5.40. Total revenues for the quarter rose 2.3 percent to $116.9 billion, but were still shy of expectations for $118 billion. This marks the fifth consecutive quarter Wal-Mart revenues missed projections. This comes as a bit of a surprise to investors, given the steady growth in retail sales over the past four months. According to the US Census Bureau, retail sales for July advanced 0.2 percent.

In response to waning sales, Wal-Mart CEO Mike Duke has vowed to improve the retailer’s grocery offerings in an effort to attract low-income shoppers, who have struggled with inconsistent employment, rising fuel costs and high taxes. Social security taxes have increased 2 percentage points this year, placing more pressure on household budgets.

Wal-Mart shares fell 2.6 percent on the revised earnings forecast, closing the New York trade at $74.41. Wal-Mart enjoyed consecutive months of strong growth between February and May, before facing stiff losses that extended beyond the June FOMC policy meetings. Year-to-date, share prices have advanced more than 10.3 percent. However, gains haven’t kept pace with the US stock market. Year-to-date, the S&P 500 has advanced more than 15 percent.

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