Wal-Mart Stores, Inc (NYSE:WMT) released earnings today pre-market trading hours, reveling lower than expected profits and a lower profit forecast for fiscal 2015. The stock opened about 3% lower, pushing the stock to a new 52 week low mark of $69.55 a share.
The largest retailer in the world has reported $3.48 billion in net income, which is a decline of approximately 15% from $4.09 billion reported same quarter last year. The company also missed earnings per share estimates, reporting $1.08 EPS a share, below the $1.12 a share expected by Wall Street. The company has reported a slight increase in revenue, $120.2 billion comparing to $120.1 billion in the same quarter last year.
The two main reasons for Wal-Mart’s continues drop in profits are currency fluctuations which resulted in lower margins in the United States, and the biggest reason is the company’s commitment to higher wages. In February this year Wal-Mart announced that the minimum hourly wage of all its employees will be raised to $9, and should go up again to $10 in 2016. In addition expenses on improving customer service and e-commerce services are accumulating as well.
Wal-Mart’s Chief Financial Officer, Charles Holley, explained in a statement that these investments are necessary for the company to make. As a result operating profits will likely continue to take hits for the rest of 2015.
Competition from Amazon (NASDAQ:AMZN) has been a major concern for Wal-Mart, and the investments made by the company are designed to make Wal-Mart a more sophisticated company, which provides online services similar to Amazon Prime services. For example, recently Wal-Mart tested a free online delivery service as well as opened several warehouses across the country to make that service more efficient.