Walmart posts lower-than-expected Q2 results

Aug 18, 2015, 3:41 PM EDT
Walmart Etobicoke Supercentre front entrance, November 18, 2014. Walmart Canada said Tuesday it has eliminated 210 jobs in the company's Mississauga head office and field management structure due to organizational changes.
Andrew Francis Wallace/Toronto Star via Getty Images

Walmart posted lower-than-expected Q2 results on Tuesday. Walmart reported net income of $3.48 billion, down 15.1% from $4.09 billion in the year-ago quarter, the company said Tuesday, writes USA Today. Walmart earned $1.08 a share in the quarter, missing analyst expectations for $1.12 a share. "In this case, our desired changes require investments, which are pressuring earnings this year," Walmart CEO Doug McMillon said in a statement. Chief Financial OfficerCharles Holley said that operating profit would continue to take a hit in the remainder of the year because of the company's commitment to higher wages and additional hours for employees.

Walmart announced in February that it would raise the starting wage of its employees to $9 an hour this year and get up to a minimum of $10 an hour by next year. The company is also investing more in store operations, customer service and e-commerce. It started testing an unlimited free shipping service similar to Amazon Prime this summer and has been opening more fulfillment centers to make online orders more efficient. Internal data show the investments may be paying off. Walmart said its customer experience scores have improved over the last year. The scores are based on customers' feelings about factors including store cleanliness, how fast the shopping experience is and availability of products on shelves.

But on Tuesday Wal-Mart said costs to increase worker hours beyond the February plan, as it tries to improve customer service with faster checkouts and better-stocked shelves, were denting earnings more than anticipated, reports Reuters. It also said reduced reimbursement rates from pharmacy benefit managers were hurting margins in its U.S. pharmacy business and that wider healthcare insurance coverage generally had led to fewer higher-margin cash transactions on drugs. Another problem is increasing "shrink," a retail industry term for losses tied to various issues including theft.

A stronger dollar took a toll on its international business, which suffered a 14 percent fall in operating income in the quarter. Same-store sales at Asda, the UK grocery arm, declined 4.7 percent, the worst quarterly performance in the 16 years it has been owned by Wal-Mart.