Wal-Mart Stores cut its annual profit and revenue outlook today as the world's largest retailer said it expects a tough economy at home and abroad to continue to squeeze its low-income shoppers.
Wal-Mart also reported second-quarter results that missed Wall Street estimates.
The spring and early summer showed some improvement from the first quarter, but overall, it has been a tough first half of the year for the discounter.
Wal-Mart's sober assessment of consumer spending adds to worries in earnings from Macy's and Kohl's. Both lowered their expectations for the year after reporting disappointing results.
Wal-Mart is considered an economic bellwether because the retailer accounts for nearly 10% of non-automotive retail spending in the US.
The latest performance indicates that many American households continue to struggle in a yo-yo economic recovery. While jobs are easier to get and the turnaround in the housing market is gaining momentum, the improvements have not been enough to sustain spending for most Americans, who are juggling tepid wage gains and higher costs of living.
On top of that, Wal-Mart said recent tax changes have further put pressure on its shoppers. Americans are dealing with a 2 percentage-point increase in payroll taxes that took effect in January 1. That means that take-home pay for a household earning $50,000 a year has been sliced by $1,000.
"The retail environment remains challenging in the US and our international markets, as customers are cautious in their spending," Wal-Mart's chief financial officer Charles Holley said in a statement.
Holley noted a "reluctance" among its customers to spend on discretionary items like flat-screen TVs. He said the top three concerns among its customers are jobs, food costs and petrol and energy prices.
The Arkansas-based retailer said its second-quarter profit rose 1.3% to $4.07 billion for the three months to the end of July. That compares with $4.02 billion a year earlier. Net sales rose 2.4% to $116.2 billion. Analysts expected earnings of $1.25 per share on revenue of $118.09 billion.
Revenue at stores open at least a year at Wal-Mart's US namesake business fell 0.3% - an important measure of a retailer's performance. Analysts were expecting a 0.7% gain.
The decline marks the second quarter of declines for the stores in a row after six consecutive quarters of increases. US Wal-Mart stores account for 59% of the company's total sales.
The US decline was less steep than in the first quarter, when Wal-Mart's US stores had a 1.4% decline in revenue at stores opened at least a year.
The company's international business saw sales increase by 2.9% to $32.96 billion.
Wal-Mart said it now expects total sales to rise 2-3% for the full year. The company's previous forecast was for growth of 5-6%. The company also reduced its full-year profit outlook, cutting it to between $5.10 and $5.30 per share, from between $5.20 and $5.40 per share.
