As expected, Wal-Mart‘s Q1 fiscal 2014 results were disappointing as its U.S. comparable store sales declined by 1.4%. This can be mainly attributed to weak consumer spending during the quarter due to the payroll tax increase and delayed tax refunds. Also, the unusually long winter impacted sales of weather-sensitive products.
However, there were some underlying positives for the retailer, including steady growth in the international business and a firm control over operating expenses. Wal-Mart gained share in most of its international markets and grew its operating income in the U.S. by almost 6%. We expect the retailer’s growth to pick up in the future driven by its focus on improving store traffic, e-commerce growth, and controlled international expansion.
Here Is Forbe’s complete analysis for Wal-Mart.
Summary Of Q1 Performance
Wal-Mart’s U.S. comparable store sales fell by 1.4% primarily due to a 1.8% decline in store traffic. The main reasons were the delay in tax refunds, a 2% payroll tax increase, prolonged cold weather and a lower-than-expected increase in grocery prices. Tax refunds this year were delayed due to the year-end complications related to the fiscal cliff. As the IRS delayed the filing process by 15 days, refund checks came later than usual.
According to the IRS, U.S. consumers received as much as $9 billion less in tax refunds this year. The 2% payroll tax increase earlier this year has particularly hurt Wal-Mart’s low income segment customers.
According to the company, lower sales of warm-weather related items such as outdoor furniture, sporting goods and spring clothing also had a part to play in the comparable store sales decline. Also, Wal-Mart’s management stated that the price inflation of grocery items, which contribute more than 50% to the retailer’s revenues, was lower than expected.