Walmart, the nation’s largest retailer, reported a drop in profits on Tuesday as it absorbed for the first time the effects of its decision to raise its employees’ wages.
Falling gas prices did not send consumers flocking to stores, either, and the company reported that revenue fell 0.1 percent to $114.8 billion in the quarter that ended April 30. Battling the effects of a stronger dollar also pushed earnings per share down to $1.03 from $1.10 in the same period a year earlier.
Analysts polled by Thomson Reuters had predicted earnings per share of $1.04 on revenue of $116.3 billion.
The earnings were the first results released since the company’s minimum wage increase took effect. The retailer cited investments in employee wages, as well as currency fluctuations, in its 8.3 percent drop in operating income to $5.7 billion.
Walmart announced this winter that by April, all employees would earn at least $9 an hour. Its minimum wage will rise to $10 in February.
Brian Yarbrough, a research analyst with Edward Jones, said: “They’re not growing sales fast enough to offset those investments.”
But those investments are likely to pay off in the long term, Mr. Yarbrough added, a belief that is shared by the company. So far, a half-million employees have received wage increases, Walmart executives said in a call on Tuesday to discuss the financial results.
“We already think it’s starting to have a positive effect,” said Charles M. Holley Jr., Walmart’s chief financial officer.
Walmart, like other retailers, has also struggled with slow sales growth as consumers have moved to online shopping platforms like Amazon. While Americans have benefited from lower gas prices, they have chosen to put that money toward paying down debt and increasing savings, Walmart said, and are still shopping cautiously.
“Maybe optimistically cautious, but still cautious,” Mr. Holley said.
Walmart recently announced it would test a program to offer shoppers free three-day shipping for a $50 annual fee. Amazon already offers a similar service, in which customers get free two-day shipping for an annual fee of $99.
Mr. Holley said the program would include more than one million items, but that it was too early to provide more details on the service.
Shares of Walmart fell 4.4 percent to close at $76.43 on Tuesday.
“Our objective is to make changes to improve our short- to midterm performance while, at the same time, position the company for the long term,” said Doug McMillon, Walmart’s president and chief executive, in a recorded call to discuss the company’s results. “By position, I’m referring to how we set ourselves up to serve customers for years to come and the strategic choices we’re making are in two critical areas: people and technology.”
Two of the country’s other large retailers reported financial results on Tuesday. Profit at Home Depot rose 14 percent to $1.6 billion, and profit at TJX, which owns the discount retailers HomeGoods, T. J. Maxx and Marshalls, rose 4.5 percent to $475 million.
Source: The New York Times