Wal-Mart is blaming depressed demand amid a still-shaky economy and a rise in payroll taxes for disappointing earnings for the quarter ending July 31.
The retail giant said Thursday that its net income rose to $4.07 billion, barely above the $4.02 billion it earned in the same quarter last year.
According to Reuters, sales at U.S. stores that have been open for at least one year fell 0.3 percent.
"The retail environment was challenging across all of our markets," Wal-Mart President and CEO Mike Duke said on a conference call.
"Wal-Mart's sales have been hampered this year by a 2 percentage point increase in Social Security taxes that has reduced spending among its shoppers, many of whom live paycheck to paycheck. Jerry Murray, a former vice president of finance and logistics at the retailer, said in a February e-mail obtained by Bloomberg News that the sales that month had been a "total disaster."
'The 2 percent payroll tax increase continues to impact our customer,' Bill Simon, Wal-Mart's U.S. president and CEO, said in today's statement. The company also expected sales to be helped by rising grocery prices, which didn't occur in a 'meaningful way,' he said."
The increase in Social Security taxes went into effect at the first of the year after Congress let a 2009 cut — aimed at economic stimulus — expire.
The company expects net sales to increase by 2 percent to 3 percent instead of the 5 percent to 6 percent it had earlier forecast.
Meanwhile, sales at the company's international stores also decreased 2.9 percent to $33 billion.
Wal-Mart blamed "significant ongoing headwinds" related to currency exchange rates. It now expects international annual sales to rise by only 3 percent instead of the 6 percent increase it had previously forecast.