Wal-Mart Stores offered a weak business outlook today as new economic challenges for its low-income US shoppers start to take a toll.
The world's largest retailer reported an 8.6% increase in profit for the fourth quarter, which includes the crucial Christmas season.
But higher petrol prices, late tax refunds and the payroll tax increase in the US have it wary about the coming year.
The US-based Wal-Mart is considered an economic bellwether because the retailer accounts for nearly 10% of non-car retail spending in the US.
Low and lower-middle income people in the US have continued to struggle, even as the housing and stock markets improve.
"We know there are challenges ahead, but we believe our strong financial position ... will continue to produce strong sales and returns for our shareholders," chief financial officer Charles Holley said.
Investors were bracing for a subdued report after a Bloomberg report last week on an email from a top executive characterising the first two weeks of February as "a total disaster."
Wal-Mart acknowledged today that February started "slower than planned" but noted that it was largely due to the delay in tax refund checks.
For the current quarter, Wal-Mart expects revenue at stores open at least a year at its US namesake business to be flat with last year. That represents a slowdown from the 1% increase in the fourth quarter.
Internationally, Wal-Mart is facing continued challenges and is focusing on increasing profitability in countries like Brazil and China. The company said the UK was particularly tough.
The company is still also grappling with bribery charges related to its operations in Mexico that surfaced last April.
The allegations are that it failed to notify law enforcement that company officials authorised millions of dollars in bribes in Mexico to speed up getting building permits and gain other favours.
The company has launched its own investigation and is working with government officials in the US and Mexico. Last November, the retailers said in a filing with the Securities and Exchange Commission that it was looking into potential US bribery law violations in Brazil, China and India.
Chief executive Mike Duke said that the company has "made significant improvement to our compliance programmes around the world in 2013 and took a number of specific actions with respect to the processes, procedures and people."
Wal-Mart said it earned $5.6 billion, or $1.67 per share, in the quarter ended January 31. That is up from $5.16 billion, or $1.50 per share, a year earlier. Net sales rose 3.9% to $127.1 billion. Earnings topped estimates of $1.57 per share, but net sales fell short of the $127.8 billion estimate.
The company said it expects earnings per share to range from $1.11 per share to $1.16 per share for the first quarter. That is below analysts' expectations for a $1.18 per share estimate.
For the year, Wal-Mart expects earnings per share between $5.20 and $5.40 per share. Analysts expect $5.38 per share. Wal-Mart also raised its quarterly dividend by 18% to 47 cents.
Asda's sales growth slowed in the fourth quarter
Asda, the British arm of US retailer Wal-Mart, said underlying sales growth had slowed in the fourth quarter of its financial year as consumers tightened spending.
Britain's second-biggest supermarket chain behind Tesco said that sales at stores open for more than a year, excluding fuel and VAT sales tax, were up 0.1% in the 14 weeks to January 5, its fiscal fourth quarter. That followed a third-quarter rise of 0.3%.
Britain's grocers are finding growth hard to come by, despite their focus on essential goods, as consumers fret over job security and a squeeze on incomes.
Last month Tesco posted a 1.8% rise in like-for-like sales for the six weeks to January 5, against a weak figure in the previous year.
Sainsbury's, the number three grocer, reported a 0.9% rise in like-for-like sales for its third quarter to Jan. 5, while number four player Morrisons saw like-for-like sales fall 2.5% in the six weeks to December 30.
The grocers have also been battling to restore consumers' trust after becoming embroiled in a horsemeat scandal that is still spreading across Europe.
Last week Asda found horse DNA in a beef Bolognese sauce. It withdrew the product from sale, along with three other beef-based products produced by supplier Greencore.
The performance of Asda, which trades from 555 UK stores serving more than 18 million shoppers a week, reflects its focus on low prices for key commodities such as bread, milk and eggs, as well as revamped fresh-food lines and increased penetration of own-brand ranges.
The company has also benefited from its price guarantee, offering to refund customers the difference, via a voucher, if an online price comparison website does not show their shopping is at least 10% cheaper than at a rival.
