Dividend hike eases Wal-Mart fears
The retail giant eases fears of slowing sales by saying its payout will increase 18% this year. But the company expects flat first-quarter results as taxes and gas prices stress consumers.
The guidance from Wal-Mart Stores (WMT) was weak. Consumers are stressed in many of its major markets by rising gas prices and economic worries. Sales in the new year look anemic.
But the stock is up $1.87 to $71.08 Thursday afternoon, in large part because the company boosted its dividend by 18%. It's the top performer among stocks in the Dow Jones Industrial Average ($INDU) on a day when stocks have been struggling.
Wal-Mart will pay out $1.88 a share this year, up from $1.59 a year ago, the company said today. Based on the current stock price, that's a 2.7% yield.
The prime beneficiaries will be members of the Walton family, who control about half the company's stock. They now stand to receive nearly $3.2 billion this year from the company, up from around $2.7 billion in the 2013 fiscal year.
The dividend increase came as Wal-Mart reported an 8.6% increase in profit for the fourth quarter, which includes the crucial holiday season.
But the 2014 fiscal year looks like it will be a bit of a struggle, as rising gasoline prices and soft economies in many of its markets take a toll. That forecast was foreshadowed in earlier news reports that raised more than a few doubts about the overall economy and the retailer's prospects.
Much of the gain came from cost-controls and aggressive sales promotions, the company said.
In the United States, the rise in the Social Security rate from 4.2% to 6.2% also will limit consumer purchases.
Investors were bracing for a subdued report after a Bloomberg report published last week leaked an email from a top executive characterizing the first two weeks of February as "a total disaster."
Wal-Mart acknowledged in Thursday's report that February started "slower than planned" but noted that it was largely due to the delay in tax refund checks.
The company expects to earn $1.11 to $1.16 a share in the first quarter of fiscal 2014, up from $1.09 in the 2013 fiscal year. For the year, it expects $5.20 to $5.40 a share in earnings, up from $5.02 in fiscal 2013.
The company didn't include a first-quarter revenue estimate. Wall Street is expecting $117.6 billion in revenue for the first quarter and $496.2 billion for the year.
One tantalizing detail. It expects to invest 9 cents a share in expanding its e-commerce operations. That's about $302 million.
Wal-Mart says it earned $5.6 billion, or $1.67 per share, in the quarter ended Jan. 31. That's up from $5.16 billion, or $1.50 per share, a year ago. Revenue rose 3.9% to $127.1 billion.
Earnings topped the consensus Wall Street estimate of $1.57 per share, but sales fell short of the $127.8 billion Street estimate.
Same-store sales, a key metric, were up 1% in the U.S. stores, with a 2.3% gain seen at Sam's Club stores.
International sales were up 6.9% to $37.9 billion. The company saw that as a disappointment because of weak same-store sales at stores in the United Kingdom, Canada and Japan. But business in Chile and Brazil was strong.
The Dow was down 78 points to 13,850 Thursday afternoon, with just six stocks showing gains. The index fell 108 points on Wednesday.
Wal-Mart shares are up a bit more than 4% this year after rising 14.2% in 2012 and 31.7% in 2011.
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Consumers are very status conscious in Asia, Africa and other emerging-market areas. This is especially true in China.
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