Walmart adjusts forecasts amid fall of shares

Wal-Mart Stores Inc., confirming worries taking place throughout the retail sector, reported an unexpected second-quarter decline in its U.S. chain’s comparable store sales and cut both its profit and sales outlook for the year. The company’s shares dropped 2.6% on Thursday to be the second-biggest decliner in the Dow. The S&P Retail Index also dropped 1.3%. Wal-Mart’s results followed Macy’s first profit miss in 25 quarters on Wednesday.

The Arkansas-based firm, reported that its second-quarter profit rose to $4.07 billion, or $1.24 a share, from $4.02 billion, or $1.18 a share. Revenue rose 2.3% to $116.9 billion from $114.3 billion.

The worlds largest retailer company cut its outlook for the full year, citing tax rates and costs arising from compliance with the Foreign Corrupt Practices Act. Wal-Mart reported in November that bribery investigations involving overseas affiliates, initially launched in Mexico, had expanded to China, India and Brazil. For the full 2013 year Wal-Mart now expects to earn $5.10 to $5.30 a share whereas previously it thought it would earn as much as $5.40.

Wal-Mart faces big challenge overseas as about 30% of its total business that has been faster growing, is the same as in the U.S. as it sees consumers in both mature and developing markets also cautious on spending.

“We aren’t delivering on the sales,” Wal-Mart International CEO Doug McMillon said on a conference call cited by MarketWatch, adding there’s a similar pattern of both U.S. and overseas consumers. “Customers around the world are more connected than they were in the past. We are seeing more common behaviors than we did in previous years.”

He added that various labor laws and contracts in the 27 countries Wal-Mart operates also makes it harder for the company to forecast sales. Wal-Mart also is trying to better monitor store opening and other labor scheduling expenses overseas. Additionally, Wal-Mart has been hurt by transition to its “everyday low price’ model from a “high-low” promotional strategy and management changes in markets like India and China, according to analysts.