US Stock Market Wavers; Wal-Mart Sinks

U.S. stocks closed lower after a choppy session Tuesday as investors digested a mixed bag of quarterly results and an upbeat report on home construction in July. The consensus was for $4.77 per share.

Similar to all consumer goods companies in the current environment, Walmart’s revenue was significantly affected by lower sales revenue internationally due to the stronger dollar. Currency fluctuations are also dragging down results.

Brent oil futures were down 0.1% to $48.67 per barrel, edging closer to a six-month intraday low of $48.24 touched last week. It’s increasing its spending for its online operations to between $1.2 billion and $1.5 billion this year, up from $1 billion last year. The pan-European FTSEurofirst index of 300 leading shares managed a gain of 0.2%, erasing earlier declines. Shares of Wal-Mart Stores, Inc.

The company said sales at stores open more than a year increased 1.5 per cent in the 13 weeks ended on Jul 31 from a year earlier.

Walmart announced that its comparable sales in its Neighborhood Markets were up 7.3% with solid sales growth from its new stores.

The revenues on constant currency basis were more than four billion higher. TJX second-quarter net soared 7% to $549 million. Excluding fuel impact, sales increased 2.8%. The Hang Seng index in Hong Kong fell 1.4%, while Tokyo’s Nikkei 225 was off 0.3%. Comps in the U.S. were up 1.5 percent with traffic driving that about 1.3 percent. Wal-Mart is counting on happier employees to improve the experience for customers.

It also said reduced reimbursement rates from pharmacy benefit managers were hurting margins in its US pharmacy business and that wider healthcare insurance coverage generally had led to fewer higher-margin cash transactions on drugs. Walmart shares have lost 19% this year which coincides with its decision in April to bump its minimum pay to $9 an hour for new hires.

Wall Street stocks finished lower on Tuesday following a mixed batch of earnings from retailers, including Wal-Mart Stores, which tumbled 3.4 per cent after slashing its profit forecast.

In fiscal 2016, Wal-Mart will continue to invest in e-commerce initiatives and in associates through higher wages and training, which in turn would put pressure on operating income. However, Wal-Mart’s shares still trade at a discount to our fair value estimate and at 15-16 times forward earnings to competitors in the space. The retailer is now looking for EPS in the range of $4.40-$4.70. Greg Foran, president and CEO of Walmart U.S., said on the retailer’s conference call to the financial community that the U.S. stores’ focus on indoor home, apparel and hardlines helped bring momentum to the checkout counters in the quarter. As such, the entry-level wage hike that benefited half a million workers is bearing fruits for Wal-Mart, as far as sales go.