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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