Wal-Mart rethinks overseas strategy, nixes planned stores
Wal-Mart will slow its growth in China and Brazil in an effort to make current stores more profitable.
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For the overall U.S. business, revenue at stores opened at least a year rose 2.5 percent, including a 4.7 percent increase at the company Sam's Club warehouses. Analysts had expected 2.6 percent.Skip to next paragraph
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Wal-Mart's international business, which produces more than a quarter of its revenue, has remained strong. The company's international sector increased 6.4 percent to $32.01 billion in the quarter. Even in the United Kingdom, which is struggling with a weak economy, Wal-Mart has seen shoppers flocking to its stores because of its low prices. It says it gained market share in the period.
Wal-Mart aims to make its overseas operations more profitable, particularly in China and Brazil. Wal-Mart said Thursday that it's slowing store expansion in China. During the first quarter, it announced it was slowing store expansion in Brazil. Holley said that this would allow the team to improve its everyday low price strategy.
In Mexico, Wal-Mart said it's delaying the expansion of some of its stores in Mexico by as much as 90 days. The delay, the company said, is due to additional steps its Mexico division is taking in the real estate process. These steps include reinforcing documentation that backs real estate projects. In addition, some stores that are set to open in Mexico the latter half of December have been moved into January 2013 to allow its operations team to focus on the Christmas season.
The delay in Mexico come four months after reports surfaced that the retailer allegedly failed to notify law enforcement after finding evidence that officials authorized millions of dollars in bribes in Mexico to speed building permits and gain other favors. The company has said it has launched its own internal investigation into the bribery matter and is working with government officials in the U.S. and Mexico. Wal-Mart has also been overhauling its compliance program.
In the latest blow, two U.S. congressmen who are doing their own investigation — Reps. Henry Waxman and Elijah Cummings — made public this week letters to Wal-Mart's CEO Mike Duke suggesting the company may have had problems with money laundering and tax evasion. Walmex, Wal-Mart's Mexico division, said in a statement that "it has no knowledge that (it) is being investigated by Mexican authorities concerning these issues."
Overall, Wal-Mart reported net income of $4.02 billion, or $1.19 per share, for the quarter ended July 31. That compares with $3.80 billion, or $1.09 per share, a year ago. Revenue excluding membership fees at Sam's Club rose 4.5 percent to $113.53 billion. Analysts had expected earnings of $1.17 per share on revenue of $114.63 billion.
The company said it expects third-quarter net income between $1.04 per share and $1.09 per share. Analysts had expected $1.05. For the full year, the company now forecasts earnings per share to be in the range of $4.83 to $4.93. That is up from Wal-Mart's original forecast of $4.72 to $4.92 per share. Analysts had expected $4.93.
Shares fell $2.45 to $72.00 in mid-day trading Thursday. Investors, who pushed Wal-Mart's stock down right after the allegations surfaced in late April, had sent shares up 25 percent since mid-May.