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Walmart drags down US markets

The world’s largest retailer was the biggest drag on the Dow Tuesday after it disappointed investors with weak second-quarter results. The company has been struggling to compete with online merchants and dollar stores.
Shares in US retail giant Walmart fell by more than 3 percent Tuesday as its quarterly results fell short of expectations, hit by currency fluctuations, wage increases and the cost of bringing its US stores up to date.

Net income at the Bentonville, Arkansas-based retailer was $3.48 billion (3.15 billion euros), down from $4.09 billion a year ago. Total revenues were flat, at just over $120 billion.

Walmart’s shares hit a nearly three-year low of $69.58 on the news, 16 percent lower than at the beginning of the year.

The company has been struggling with a slow economic recovery along with competition both from online retailers, especially Amazon, and dollar stores. It has been refurbishing many of its superstores in response. But Walmart also faces rising wages in light of public pressure to improve working conditions.

“Operating profit will be pressured for the remainder of the year, due to continued investments in store associate wages and additional hours,” Walmart executive vice president Charles Holley said.

It was a far more dramatic picture in Britain, where Walmart’s British Asda subsidiary posted its worst-ever results since Walmart bought the company in 1999.

In an environment Chief Executive Andy Clarke described as “the worst storm in retail history,” like-for-like sales declined 4.7 percent in the second quarter. This came after sales already declined 3.9 percent in the first quarter, Asda’s worst performance in five years.

It and other major British supermarkets Tesco, Morrison’s and Sainsbury’s are facing an onslaught from German discounters Aldi and Lidl, which offer low prices from a streamlined, largely own-brand range at smaller stores.

sgb/uhe (Reuters, AP)

Topics: retail

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