Wal-Mart Stores Inc on Thursday posted a 1.9 percent rise in July sales at US stores open at least a year, toward the top end of its forecast, after cutting prices to attract shoppers. But the world's largest retailer, which will report quarterly earnings on Tuesday, warned that its aggressive price reductions were hurting gross margins.
Sarah Henry, an investment analyst at the Sovereign Asset Management group at MFC Global, said it was worrisome to hear Wal-Mart talk about margin pressure. Wal-Mart has returned to emphasising low prices. To spur sales around the July 4 US Independence Day holiday, it implemented "deep cuts" in prices on top brand-name items and food.
And last month it announced price cuts of as much as 50 percent on 16,000 items, like school supplies and backpacks, to jump-start back-to-school sales. Wal-Mart had forecast July same-store sales would rise 1 percent to 2 percent. Analysts on average were expecting a gain of 1.5 percent, according to Reuters Estimates. Same-store sales rose 1.3 percent at Wal-Mart stores and 5.1 percent at the Sam's Club warehouse unit.
Wal-Mart said net sales in the four weeks ended on August 3 rose 6.5 percent to $27 billion, while total sales for the second quarter that ended July 31 were about $92 billion. The Bentonville, Arkansas-based retailer said it was encouraged by positive early signs in back-to-school categories and was seeing strong demand for dorm-room items like microwaves, small refrigerators, and coffee makers.
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