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Were Wal-Mart's Earnings Really All Doom And Gloom?

Were Wal-Mart's Earnings Really All Doom And Gloom?

On Thursday, discount retailer Wal-Mart Stores Inc. (NYSE: WMT) gave investors a disappointing outlook for the coming year by cutting sales forecasts and cautioning that headwinds would keep the results of the firm's efforts to boost growth muted.

Traders abandoned the stock in response, sending Wal-Mart shares down 3 percent.

Sales Slump

In October, Wal-Mart expected its sales to grow between 3 and 4 percent this year, but on Thursday that forecast was revised to predict "relatively flat" sales. This was troubling to investors, especially since the company has laid out a plan to invest billions in future growth throughout the coming year.

However, in an effort to assuage fears, Wal-Mart confirmed that the guidance wasn't the result of diminishing sales trends, but instead reflected the company's decision to close several stores as well as the currency headwinds resulting from a stronger dollar.

Bright Spots

While concerns about whether or not Wal-Mart will be able to turn its business around this year rose following the company's earnings call, there were some bright spots. For one, the company's customer satisfaction scores are on the rise, the result of Wal-Mart's investment in improving its shopping experience.

The firm also saw its inventory growth level off and was able to cut down on shipping costs.

Still A Long Road

Wal-Mart has a long way to go before it can shore up its balance sheet. Fourth-quarter profit fell 8 percent as the firm increased employee wages and invested in lowering the price of goods offered in store.

Factors outside of the firm's control also dented profits as meat and dairy prices stumbled and the US dollar gained strength.

Forward Facing

However, some are using now as a time to buy Wal-Mart shares as the company's future potential looks strong.

The firm is undergoing a period of change as it shifts its focus toward improving its presence online and positions itself for solid growth in the future.

Posted-In: Earnings Long Ideas News Top Stories Markets Trading Ideas General Best of Benzinga


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