Cut prices hit Wal-mart profits

Wal-mart, the world’s largest retailer, reported Tuesday that its fiscal earnings dropped 15 percent for the three months to January 31, with an emphasis on cutting prices in its US outlets shrinking margins.

The US multinational posted $5.1 billion in net income for the fourth quarter, compared with $6.1 billion for the same period in the previous year, according to the Agence France Presse.

Wal-mart’s quarterly profit and sales fell short of Wall Street expectations. Its shares, up more than 29 percent since August, dropped 4.2 percent in early trading, undoing the gains seen so far this year, Reuters reported.

Wal-mart US, the company’s largest division, has been cutting prices and reintroducing a wider variety of items in a bid to woo back shoppers feeling the pinch of the financial crisis and turning to dollar stores and elsewhere for consumer items.

The lower prices did attract more customers during the key holiday season, with traffic at those stores rising after six quarterly declines, but shoppers did not spend as much as investors had hoped.

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“It’s not the most inspiring result, but [Wal-mart] are in a better place than they were 12 months ago,” Natalie Berg, global research director for Planet Retail in London said in an interview with Bloomberg.

“Going back to basics is a winning strategy, but it will take some time.”

Sales at Wal-mart’s US stores open for at least a year rose 1.5 percent, the second gain in the past 10 quarters and a sign that momentum there had been maintained, according to The Financial Times.

Total revenue in the quarter rose 5.9 percent to $123.2 billion, helped along by $2.4 billion from newly-acquired Netto stores in the UK and Massmart in South Africa.

Yesterday Wal-mart unveiled plans to increase its share in Chinese e-commerce firm Yihaodian to a controlling 51 percent, in a bid to secure new revenue sources and boost its online presence in China. 

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