It is not a good day to be Walmart’s new CEO Doug McMillon. Traffic to Walmart locations nationwide has been on the decline all year and the company has just reported its fifth straight decline in U.S. sales numbers.
Walmart’s profits fell 5 percent from the same time a year earlier during the three months that ended April 30th, 2014. Though revenue rose, it was by a mere 0.8 percent to $114.96 billion. The results prompted a 2.4 percent decline in stock price.
Fundamental dynamics haven’t changed, and household incomes are still flat,” said Bill Simon, Walmart’s U.S. president, reports The Wall Street Journal. “As we head toward the political season and rhetoric heats up, it will continue to challenge consumer confidence.”
Walmart is dealing with the changing shopping habits of the American consumer, who are increasingly online and on mobile, which has forced some retailers into the death spiral MPD CEO Karen Webster writes about here.
Some, like Montreal-based portfolio manager at ScotiaMcLeod John Schwinghamer, think whatever the causes, the message to investors with this persistent numbers slump is clear.
“This is a game changer and a warning sign to investors that Wal-Mart is facing challenges in the competitive environment that they may not easily overcome this time,” Schwinghamer told The Journal. “It tells you that the ship isn’t as water tight as it used to be.”
Walmart attributes much of this quarter’s drop in profits to extreme winter weather that depressed shopping nationwide. They are also focuses on new initiatives, like the launch of 300 smaller scale Walmart stores, that seek to tap into the consumer segment that are making dollar stores popular.
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