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Old Man Winter Takes Down Wal-Mart, but That's No Surprise


Wal-Mart reported an earnings miss this morning.

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Wal-Mart (NYSE:WMT) is in the news today on account of its weak first-quarter results, which it's blaming on Old Man Winter.

Earnings came in at $1.10 per share, missing by a nickel, while revenues were $114.2 billion -- about 1.2% shy of the $115.6 billion consensus. Wal-Mart said it took a $0.03 EPS hit from the weather, while excluding currency, revenues would have been $115.7 billion.

Throughout Q1 earnings season, knocking companies that blame the weather has turned into a Twitter (NYSE:TWTR) meme, even though in the case of retail, weather can most certainly make people stay home and shop less. Sky-high utility bills aren't helping consumers, either.

In any case, I wouldn't count Wal-Mart's quarter as saying much of anything about the US economy. And it's certainly not a surprise.

Here are some things to keep in mind:

1) Retailers have already been reporting mediocre earnings. According to FactSet, as of May 12, expected Q1 earnings growth for retailers was just 1.7% because of the weather. We won't know much until we get second-quarter numbers, where growth is expected to bounce back to 5.8%.

2) Last year, Wal-Mart's US sales rose just 1.8%. With that in mind, the fact that it's still growing sales at all on such a huge revenue base is remarkable in itself.

3) Competition in online retail is clearly an issue. While Wal-Mart's online sales rose 27%, think about just how big (NASDAQ:AMZN) is getting. In Q1, Amazon had $15.7 billion in net product sales. It grew sales in that segment by $2.4 billion, while Wal-Mart grew its total sales by just $854 million. Plus, Amazon generated significant additional revenues through third-party seller fees, which are growing faster than the core retail business.

Add in eBay (NASDAQ:EBAY) and other smaller online players, and you have a bad recipe for growth for big-box retail.

The bottom line is, the retail sector and Wal-Mart's lower-income consumer base haven't been doing well for a while, so this latest disappointment is nothing new.

Twitter: @MichaelComeau

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