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Business

Food stamp cuts, bad weather hurt Walmart’s profit

Walmart announced Thursday that profit in the fourth quarter, which included the pivotal holiday shopping season, were down 21 percent from the same period a year ago.

Jacquelyn Martin/Associated Press/File

Walmart announced Thursday that profit in the fourth quarter, which included the pivotal holiday shopping season, were down 21 percent from the same period a year ago.

Walmart Stores Inc. reported disappointing earnings for its fourth quarter and fiscal year, citing domestic problems such as severe storms, cuts to federal benefits, an economically struggling customer base, and international uncertainties such as currency fluctuations.

The company announced Thursday that profit in the fourth quarter, which included the pivotal holiday shopping season, was down 21 percent from the same period last year.

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Sales at US stores open for at least a year were down 0.4 percent — its fourth consecutive negative number in that category — and traffic in US locations declined 1.7 percent.

Excluding certain one-time costs, like store closures in Brazil and China, the company came in at the low end of its guidance.

The company also said Thursday that it was seeing success at its small-format stores, and planned to roll out more locations than previously announced.

In a call with reporters, William S. Simon, the chief executive of Walmart US, said that cuts to the federal Supplemental Nutrition Assistance Program, or food stamps, crimped the company’s results.

An exceptionally ferocious winter with multiple storms also cut into earnings, Simon said, detracting from a positive performance during the six-week holiday shopping period. He said the storms “aren’t an excuse, but merely an explanation.”

Ken Perkins, founder of Retail Metrics, said the company’s central problem was the plight of its core consumers, who are still struggling with stagnant wages and have been left out of areas of economic growth, like rising stocks and home values.

“It’s emblematic of the space,” Perkins said. Companies “that serve lower- and moderate-income consumers have been struggling to grow their business.”

Perkins also said that most of the higher-income consumers who went to Walmart during the height of the recession have mostly vanished from its aisles, and the company has had trouble making lasting inroads with those customers.

Internationally, Walmart struggled as well.

Net sales were down 0.4 percent, in part because of currency fluctuations, as the dollar strengthened against other currencies.

In addition to several one-time costs in India, China and Brazil, the company cited relatively high unemployment and low inflation as challenges to its business.

For the first quarter of this fiscal year, the company forecast earnings of $1.10 to $1.20 per share, below the analyst consensus of $1.23 according to Thomson Reuters.

One area where the retailer appeared to fare well was in its small-store format, whose sales grew 5 percent in the quarter. The company announced Thursday that it would speed up its expansion of such stores, opening about 270 to 300 locations during the fiscal year, double its initial plan of 120 to 150.

Simon said traffic at the small stores was up and same-store sales growth was “in the top tier amongst grocery competitors.”

“So that’s why we’re expanding and really stepping on the pedal on the small stores,” he said.

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