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Price cuts hurt Wal-Mart's margins

Thursday, August 17, 2017 - 01:06

The retailer's same-store sales in the U.S. rose for the 12th straight quarter. But price cuts and e-commerce investments cut into its margins. Fred Katayama reports.

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More customers shopped and spent more at Wal-Mart in the latest quarter, driving sales higher. But investors soured on its profitability. Operating profit margins fell below 5 percent because the giant retailer invested heavily in e-commerce operations and cut prices. Moody's analyst Charlie O'Shea said, "Walmart continued to garner precious market share in the U.S. in the second quarter ... however, operating margins fell slightly, reflecting the company's strategy of tactically investing in price to extract that share." Like its rival, Target, falling profit and rising sales at existing U.S. stores beat Wall Street's forecasts. Those comparable sales increased for the 12th straight quarter. Its domestic online sales mushroomed 60 percent. International sales would've increased were it not for the negative impact of a stronger dollar. The company hiked the low end of its earnings forecast for the full year. Wal-Mart shares fell at the market open Thursday. They've outperformed the broader market with a 17 percent gain so far this year.

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Price cuts hurt Wal-Mart's margins

Thursday, August 17, 2017 - 01:06