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Wal-Mart Cuts Forecast as Pay Raises, Currency Moves Take Toll

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Wal-Mart Cuts Forecast as Pay Raises, Currency Moves Take Toll

Wal-Mart, the world’s biggest retailer, cut its annual earnings forecast for the year, hurt by currency fluctuations and a high-profile pay bump for US employees.

The company now expects profit of $4.40 to $4.70 a share this fiscal year, which runs through January, according to a statement on Tuesday.

Wal-Mart had previously forecast earnings of as much as $5.05 a share.

Chief Executive Officer Doug McMillon is coping with a strong dollar overseas, which has cut into revenue. He’s also raised wages in the US, aiming to retain more employees and improve customer service. While those efforts have increased costs, they are helping fuel growth, McMillon said. Wal-Mart’s same-store sales, excluding currency and fuel spending, rose 1.5 per cent last quarter. That beat the one per cent projected by analysts, according to Consensus Metrix.

“The changes we need to make require investment, and we’re pleased with the steps we’ve taken,” McMillon said on a prerecorded conference call for investors. “Even if it’s not as fast as we’d like, the fundamentals of serving our customers are consistently improving, and it’s reflected in our comps and revenue growth.”

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Wal-Mart shares fell as much as 3.5 per cent to $69.42 in early trading in New York after the results were released. The stock slid 16 per cent this year through Monday’s close.

Wal-Mart also posted second-quarter earnings that missed analysts’ estimates. Profit amounted to $1.08 a share in the period, excluding some items, the Bentonville, Arkansas-based company said. Analysts had expected profit of $1.12 a share, according to data compiled by Bloomberg.

News by Bloomberg, edited by ESM

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