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U.S. NEWSThursday 15 October 2015

US Business Extra:                                                                                                                Netflix adds 3.62M subscribers
                                                                                                                                 in 3Q, but growth lagging in US
 Wal-Mart plunges after profit warning 
                                                                                                                                MICHAEL LIEDTKE
NEW YORK (AP) — Wal-             ating pace,” said McMil-       while running a tighter ship.                                   Associated Press
Mart stock had its biggest       lon, who took the job in       Instead of throwing away                                        SAN FRANCISCO (AP) — Binging on Netflix may be
one-day drop in nearly           February 2014.                 a princess costume for                                          losing some of its appeal in the U.S., even as the ad-
three decades after the          Under McMillon, Wal-Mart       Halloween that is missing                                       diction rapidly spreads to other parts of the world.
world’s largest retailer said    has accelerated the open-      its crown, for instance, he                                     The Internet video service added 3.62 million sub-
it’s bracing for its profit      ings of smaller stores, which  said stores would mark it                                       scribers during the three months ended September,
to take a hit as it works to     tend to be more conve-         down to a lower price.                                          it announced Wednesday as part of its third-quarter
fend off competition.            niently located and let        He said Wal-Mart custom-                                        earnings. That’s slightly more than the company had
The company is forecast-         customers get in and out       ers would be “happy” to                                         predicted.
ing its profit to fall by as     faster. On Wednesday, it       pay less for such an item.                                      But Netflix didn’t gain as many U.S. subscribers dur-
much as 12 percent in its        also said it was expanding     More broadly, Foran is                                          ing the latest quarter as management anticipated,
next fiscal year as it perks     its online grocery with free   spearheading a major                                            a shortfall that it blamed on an unusually large num-
up customer service and          pickup to 10 additional        overhaul of the U.S. divi-                                      ber of accounts cancelled because the company
adapts to changing shop-         markets, making the ser-       sion, which accounts for                                        couldn’t charge their credit cards. The company be-
ping habits. It also expects     vice available in a total of   60 percent of the com-                                          lieves the trouble is tied to a large number of new
sales for this full fiscal year  20 markets in the U.S.         pany’s total  business. That                                    credit-card account numbers banks are issuing as
to be flat, hurt by unfavor-     Such moves, along with a       includes basics like making                                     they adopt card technology based on computer
                                                                                                                                chips instead of magnetic stripes.
Wal-Mart Store, Inc., Chief Executive Officer Doug McMillon speaks at the Wal-Mart shareholder                                  In the third quarter, Netflix gained just 880,000 sub-
meeting in Fayetteville, Ark. Wal-Mart on Wednesday, Oct. 14, 2015 said it expects profit to fall                               scribers in the U.S., below the 1.15 million customers
for its next fiscal year and cut its sales outlook for this year as it works to fend off intensifying                           that the company had predicted. It was also fewer
competition and perk up stores with better customer service.                                                                    than the 980,000 U.S. subscribers that the service add-
                                                                                                                                ed this time last year. Netflix has picked up 16 million
                                                                                                     (AP Photo/Danny Johnston)  more subscribers during the past year alone, leaving
                                                                                                                                the service with 69 million worldwide customers as of
able currency exchange push to improve the clean- sure stores are cleaner and                                                   September.
                                                                                                                                Disappointing growth in the U.S. appeared to raise
rates. Wal-Mart had previ- liness of its U.S. stores, are well stocked. The stores                                              fears that Netflix may be having trouble attracting
                                                                                                                                more subscribers in its biggest market. It’s facing
ously forecast sales growth expected to help attract have been criticized for                                                   tougher Internet-video competition from Amazon.
                                                                                                                                com, Hulu and an online-only application from pay-
of 1 to 2 percent.               more higher-income cus- messy aisles and not hav-                                              TV provider HBO.
                                                                                                                                “We’re all racing to fulfill consumer desires,” Netflix
Its stock closed down $6.70, tomers than in the past, ing enough workers to re-                                                 CEO Reed Hastings wrote in a letter accompanying
                                                                                                                                the third-quarter results.
or 10 percent, at $60.03 McMillon said. But he not- stock shelves.                                                              Netflix’s stock shed $8.23, or 7.5 percent, to $102 in
                                                                                                                                extended trading after the numbers came out. Even
Wednesday.                       ed the company would For its fiscal 2017, Wal-Mart                                             with that drop, the shares have still more than dou-
                                                                                                                                bled so far this year.
The disappointing guid- also remain focused on expects earnings per share                                                       Nearly two-thirds of Netflix’s subscribers, 43 million ac-
                                                                                                                                counts, are located in the U.S. But the streaming ser-
ance comes as Wal-Mart shoppers who are driven to be down 6 to 12 per-                                                          vice is turning into a global phenomenon; Netflix is
                                                                                                                                pushing to offer its service in 200 countries by the end
Stores Inc. works to fix by low prices. Wal-Mart cent. The company attrib-                                                      of next year.
                                                                                                                                Netflix is currently available in about 80 nations,
its  business  amid pressure is under pressure on that uted a big portion of the                                                meaning it will have to launch its service in an aver-
                                                                                                                                age of about eight more countries each month to
from rivals including tradi- front as well, with smaller decline to its plan on rais-                                           meet its deadline. The service will start streaming in
                                                                                                                                Spain, Italy and Portugal before the end of this year
tional grocers, dollar stores discounters posing a great- ing wages and providing                                               and then go into South Korea, Hong Kong, Taiwan
                                                                                                                                and Singapore early next year.
and Amazon.com. At its er threat. The company more training for workers,                                                        Many of the countries located in Asia and Africa are
                                                                                                                                likely to be more challenging to navigate than the
annual meeting in New said its store brands, which which Wal-Mart hopes will                                                    mostly European and Latin American countries that
                                                                                                                                Netflix has already entered.
York City Wednesday, CEO tend to cost less, will play a lead to improved service.                                               The Los Gatos, California, company currently has 26
                                                                                                                                million subscribers outside the U.S., a 64 percent in-
Doug McMillon sought to key role in making it more Wal-Mart, which is also fac-                                                 crease from the same time last year when it was in
                                                                                                                                fewer countries.
reassure investors that that competitive with discount- ing pressure from worker                                                The international push is costing Netflix hundreds of
                                                                                                                                millions of dollars, although the company has re-
the profit decline next year ers. Greg Foran, who took groups calling for better                                                mained profitable. Netflix earned $29.4 million in its
                                                                                                                                latest quarter, a 50 percent drop from the same time
is part of its plans to posi- over as CEO of Wal-Mart’s pay, increased its minimum                                              last year. The company expects to bring even next
                                                                                                                                year.
tion for the future.             U.S. division last year, also wages for U.S. employees                                         Netflix’s profit margins are also being squeezed as it
                                                                                                                                pours more money into original programming such as
“We all know that retail has noted on Wednesday the to $9 per hour in April. The                                                the “Orange Is The New Black,” which can only been
                                                                                                                                seen on its service initially.q
changed and will continue company’s commitment figure will rise to $10 per
to change at an acceler- to delivering low prices hour by February 2016.q
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