Wal-Mart shocked Wall Street yesterday with disappointing first-quarter profits which it attributed to America's sky-high gasoline prices and unseasonally cold weather. Despite having reported weak monthly sales growth since the start of the year, shares in the world's largest retailer slumped 4 per cent in morning trade in New York after it unveiled the results for its first quarter.
Lee Scott, the chief executive of the discount shopping chain, said: "Our results were not up to Wal-Mart standards. Gas prices rose dramatically, Easter was early but spring was not." Sales in US stores open for a year or more climbed a modest 3 per cent.
Net profits of the Bentonville, Arkansas-based company were $2.5bn (£1.3bn) compared with $2.2bn in the same period a year earlier.
Asda, which Wal-Mart owns in the UK, contributed to the gloom. Wal-Mart's Treasurer, Jay Fitzsimmons, said: "After years of strong growth in the market, retail sales have slowed and the environment has become very competitive. Operating profit in the quarter in the UK was below plan." Asda accounts for about half of the sales of Wal-Mart's international division and 10 per cent of group sales. While high gasoline prices have been a problem for Wal-Mart's typical low-income customers, the chain has also come under fire for failing to react to new trends in retailing, such as offering more fashionable goods at low prices. It has also been criticised for being slow to tempt into its stores those on higher incomes who have been more resilient to the rising cost of fuel.
Wal-Mart said its second quarter would continue to be "challenging" but predicted a recovery in the second half of the year.