Weak sales at Walmart
Bad weather and a reduction in food stamps led to weaker-than-expected sales at Walmart and Sam’s Club, which combined with greater-than-expected international expense, prompted an uncharacteristic pre-announcement from the company that fourth-quarter profits would be worse than expected.
Walmart said its earnings per share adjusted to exclude several non-recurring and greater-than-expected expenses related to international operations would be below the low end of a previously provided forecast of $1.60 to $1.70 and full year earnings per share would be below earlier guidance in the range of $5.11 to $5.21.
The earnings miss for the quarterly period ended Jan. 31 was attributed to a number of factors. In the U.S., same-store sales at Walmart stores and Sam’s Club are both expected to be slightly negative, according to Walmart CFO Charles Holley, compared to earlier guidance which called for comps at Walmart to be roughly flat and comps at Sam’s in the range of flat to 2%.
“Despite a holiday season that delivered positive comps, two factors contributed to lower comp sales performance for the 14-week period for Walmart U.S.,” Holley said. “First, the sales impact from the reduction in SNAP (the U.S. government Supplemental Nutrition Assistance Program) benefits that went into effect Nov. 1 is greater than we expected. And, second, eight named winter storms resulted in store closures that impacted traffic throughout the quarter. Sam’s Club was also impacted by the weather throughout the quarter.”
The pre-announcement by Walmart is unfamiliar territory for a company accustomed to meeting or exceeding its forecasts. It also marks an inauspicious beginning to a new leadership era at the world’s largest retailer. Walmart International president and CEO Doug McMillon assumes the role of president and CEO of Wal-Mart Stores on Feb. 1 when current president and CEO Mike Duke steps down.
Walmart is scheduled to report fourth-quarter results on Feb. 20.
Market Recap: RISI Crow’s Construction Materials Cost Index
A price index of lumber and panels used in actual construction for Jan. 31, 2014
*Western – regional species perimeter foundation; Southern – regional species slab construction.
Crow’s Market Recap — A condensed recap of the market conditions for the major North American softwood lumber and panel products as reported in Crow’s Weekly Market Report.
Lumber: Rumors circling the SPF lumber market on Thursday regarding sales to China awakened what was, earlier in the week, a quiet marketplace. Neither the early slowness nor increase in sales activity later in the week persuaded producers to do much in the way of altering quotes. The swath of snow and ice enveloping much of the Southeast early in the week brought Southern Pine lumber production to a standstill at many mills. Unable to get to offices, many buyers could not participate in the market. A quiet beginning to the week prompted increased discounting in the Coastal species lumber market. Moderately improved market activity Thursday did little to firm up those prices of items, particularly wide widths, already carrying downward momentum. Sales volumes of Inland species lumber were lighter, but producers were able to get their asking levels in most cases. Prices for Radiata Pine Mldg&Btr remained firm and availability was limited. Offerings of Shop were slim to none. Sales activity for Ponderosa Pine Shop lumber remained quiet, as window and cut stock plants slowed down their purchasing. Ponderosa Pine board producers reported a quiet close to the week. Inquiry and sales were more active for narrow widths. Good order files and a slowdown in production added to an already strong Eastern White Pine market. Steady sales of ESLP continued and prices on some items of #3 increased $5. Activity remained focused on narrow widths of Std&Btr and #2&Btr. Winter weather throughout much of the U.S. continued to restrict Western Red Cedar consumption. Price movement on any particular item in a given week has been upward, and continues to be, despite the weather.
Panels: Snow and freezing temperatures put a lid on activity in many OSB markets. Even though market activity quieted, producers quoted at, or even a little above, published levels. However, buyers with purchase orders in hand were many times able to garner discounts for volume purchases. Due to the snow and ice event in the Southeast, a number of Southern Pine plywood mills shut down Tuesday and did not start back up until Thursday or Friday. Improved sales activity Thursday allowed producers to sell greater volumes than they had all week. Still, by Friday morning, rated sheathing availability remained in the week of February 3. Western Fir plywood buyers remained well aware of mills “drawing a line in the sand” but had little incentive to purchase any more than immediate needs in minimal volumes. Pricing was flat overall but still weak. For the second week in a row, Canadian plywood producers wrote enough business to extend order files and move prices up. Most mill order files were into the end of February or later, and sales were at 1 or 2 points over last Friday’s published levels. Both particleboard and MDF mills reported steady sales. Mills able to sell more than a week’s worth of production continued to lower inventories developed at the end of last year.
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