WSJ - Wal Mart Outlook May Damp Holidays As Retailers Post Mixed October Sales ::
November 02, 2006
Wal-Mart Outlook May Damp Holidays
As Retailers Post Mixed October Sales
By KRIS HUDSON
November 2, 2006 7:21 p.m.
DALLAS -- Wal-Mart Stores Inc. predicted its November sales will show no gain over its results from the same month a year ago, signaling a weak start to the holiday season for the giant retailer as it struggles with an image overhaul and weak apparel sales.
Wal-Mart, Bentonville, Ark., on Thursday reported a gain in October same-store sales -- or sales at stores open for at least a year -- of 0.5% for its U.S. stores. That aggregate figure included a 2% gain by its Sam’s Club membership-warehouse division and a 0.3% gain by its larger Wal-Mart Stores division of 3,200 supercenters, discount stores and Neighborhood Market grocery stores. However, factoring in gasoline sales at Sam’s Club are included, Wal-Mart’s total gain for October was only 0.2%, due to a decrease in gas prices from October 2005.
CHARTING SALES
Wal-Mart logged global sales in October of $25.7 billion, up 11.7% from October 2005. Its core Wal-Mart Stores division notched a 7.7% gain to $16.6 billion in sales. Sam’s Club posted $3.1 billion in sales, a 1.2% gain. And Wal-Mart’s more than 2.700 international stores posted $6 billion in sales, up 32.1%.
Trading of Wal-Mart’s stock closed at $48.29 on Thursday, down 56 cents, or slightly more than 1%, on the New
York Stock Exchange.
Most other publicly traded retailers posted better percentage gains in October than Wal-Mart. Retail Metrics LLC, a market analysis firm in Swampscott, Mass., reported that the 56 retailers it tracks posted an average gain of 2.9% for October. Wal-Mart’s archrival, Target Corp., Minneapolis, posted an October gain of 3.9%.
Wal-Mart’s October same-store gain was its lowest since December 2000. And the retailer predicts its November gain to fall even lower than that, only matching its sales from November 2005. Just twice since it began reporting monthly results in 1979 has Wal-Mart registered a similar or lower result: A “flat” or no-gain result in February 1993 and a 0.6% decline in April 1996, when the Easter holiday fell in an earlier month than in the previous year.
SALES CALL
Wal-Mart blamed the weak October showing on difficulty surpassing its 4.7% gain from October 2005, which was fueled by shoppers in the Southeast stocking up on goods in the wake of Hurricanes Katrina and Rita. To that point, Wal-Mart said that, factoring out the hurricane-influenced stores in the Southeast, the balance of its stores posted a cumulative 1.7% same-store gain last month. Its strongest regions last month were in the Rocky Mountains and the Midwest.
Wal-Mart also has attributed its sales slump to disruption caused by its efforts to remodel hundreds of stores prior to the holiday season. It anticipates those stores will see a boost to their sales once the remodeling efforts are completed. The remodeling will cease in the coming days and resume in January.
Even so, Wal-Mart has seen sputtering results from its efforts this year to appeal to more affluent shoppers. The retailer saw a decline recently of as much as 4% in same-store sales of women’s fashion apparel, a category the retailer is pushing with in-house brands such as Metro 7 and George to entice shoppers to spend more in its stores. In reaction to the falloff, Wal-Mart executives said the retailer had put too much emphasis on trendy women’s fashion and now will return some focus to the basic apparel for which it is known.
“We believe Wal-Mart is aggressively pushing vendors for incremental basic apparel while trying to cancel as many orders as possible for higher-fashion items,” Banc of America Securities analyst David Strasser wrote in a note to his firm’s clients on Tuesday.
In addition to the slight pullback in women’s fashion, Wal-Mart has signaled a return to its roots as the holiday season begins, trumpeting price reductions on toys and other goods.
“Price rollbacks on key toys that went into effect in mid-October generated significant lift in unit volume,” Chief Financial Officer Tom Schoewe said in a release issued Thursday. “In electronics, another dynamic category for the holiday season, we have several initiatives planned to drive holiday sales. We have expanded our brand offerings, improved our product presentations in the store, reinforced our value pricing and doubled the assortment of accessories.”
Electronics sales are among the few bright spots for Wal-Mart, with items such as flat-panel televisions and mp3 players producing triple-digit percentage increases from last year’s sales, according to Mr. Strasser.
“November’s outlook for only flat same-store-sales is disturbing provided the expected (same-store sales) lift from the company’s remodeling program and $4 generic drug program,” JP Morgan Securities analyst Charles Grom said, referring to Wal-Mart’s program to offer 30-day prescriptions of some generic drugs for $4 in 27 states. “Moreover, provided the continued weakness in apparel sales, largely women’s, we remain concerned that Wal-Mart’s upcoming holiday could be weaker than expected.”
Wal-Mart’s November forecast cast a cloud over many of the retailer’s suppliers on Thursday. Of 104 publicly traded U.S. suppliers that derive more than 10% of their sales from Wal-Mart, 62 saw declines in their stock on Thursday, according to Revere Data LLC of San Francisco. Of the rest, 30 saw their stocks rise and 12 saw no change.
As Retailers Post Mixed October Sales
By KRIS HUDSON
November 2, 2006 7:21 p.m.
DALLAS -- Wal-Mart Stores Inc. predicted its November sales will show no gain over its results from the same month a year ago, signaling a weak start to the holiday season for the giant retailer as it struggles with an image overhaul and weak apparel sales.
Wal-Mart, Bentonville, Ark., on Thursday reported a gain in October same-store sales -- or sales at stores open for at least a year -- of 0.5% for its U.S. stores. That aggregate figure included a 2% gain by its Sam’s Club membership-warehouse division and a 0.3% gain by its larger Wal-Mart Stores division of 3,200 supercenters, discount stores and Neighborhood Market grocery stores. However, factoring in gasoline sales at Sam’s Club are included, Wal-Mart’s total gain for October was only 0.2%, due to a decrease in gas prices from October 2005.
CHARTING SALES
Wal-Mart logged global sales in October of $25.7 billion, up 11.7% from October 2005. Its core Wal-Mart Stores division notched a 7.7% gain to $16.6 billion in sales. Sam’s Club posted $3.1 billion in sales, a 1.2% gain. And Wal-Mart’s more than 2.700 international stores posted $6 billion in sales, up 32.1%.
Trading of Wal-Mart’s stock closed at $48.29 on Thursday, down 56 cents, or slightly more than 1%, on the New
York Stock Exchange.
Most other publicly traded retailers posted better percentage gains in October than Wal-Mart. Retail Metrics LLC, a market analysis firm in Swampscott, Mass., reported that the 56 retailers it tracks posted an average gain of 2.9% for October. Wal-Mart’s archrival, Target Corp., Minneapolis, posted an October gain of 3.9%.
Wal-Mart’s October same-store gain was its lowest since December 2000. And the retailer predicts its November gain to fall even lower than that, only matching its sales from November 2005. Just twice since it began reporting monthly results in 1979 has Wal-Mart registered a similar or lower result: A “flat” or no-gain result in February 1993 and a 0.6% decline in April 1996, when the Easter holiday fell in an earlier month than in the previous year.
SALES CALL
Wal-Mart blamed the weak October showing on difficulty surpassing its 4.7% gain from October 2005, which was fueled by shoppers in the Southeast stocking up on goods in the wake of Hurricanes Katrina and Rita. To that point, Wal-Mart said that, factoring out the hurricane-influenced stores in the Southeast, the balance of its stores posted a cumulative 1.7% same-store gain last month. Its strongest regions last month were in the Rocky Mountains and the Midwest.
Wal-Mart also has attributed its sales slump to disruption caused by its efforts to remodel hundreds of stores prior to the holiday season. It anticipates those stores will see a boost to their sales once the remodeling efforts are completed. The remodeling will cease in the coming days and resume in January.
Even so, Wal-Mart has seen sputtering results from its efforts this year to appeal to more affluent shoppers. The retailer saw a decline recently of as much as 4% in same-store sales of women’s fashion apparel, a category the retailer is pushing with in-house brands such as Metro 7 and George to entice shoppers to spend more in its stores. In reaction to the falloff, Wal-Mart executives said the retailer had put too much emphasis on trendy women’s fashion and now will return some focus to the basic apparel for which it is known.
“We believe Wal-Mart is aggressively pushing vendors for incremental basic apparel while trying to cancel as many orders as possible for higher-fashion items,” Banc of America Securities analyst David Strasser wrote in a note to his firm’s clients on Tuesday.
In addition to the slight pullback in women’s fashion, Wal-Mart has signaled a return to its roots as the holiday season begins, trumpeting price reductions on toys and other goods.
“Price rollbacks on key toys that went into effect in mid-October generated significant lift in unit volume,” Chief Financial Officer Tom Schoewe said in a release issued Thursday. “In electronics, another dynamic category for the holiday season, we have several initiatives planned to drive holiday sales. We have expanded our brand offerings, improved our product presentations in the store, reinforced our value pricing and doubled the assortment of accessories.”
Electronics sales are among the few bright spots for Wal-Mart, with items such as flat-panel televisions and mp3 players producing triple-digit percentage increases from last year’s sales, according to Mr. Strasser.
“November’s outlook for only flat same-store-sales is disturbing provided the expected (same-store sales) lift from the company’s remodeling program and $4 generic drug program,” JP Morgan Securities analyst Charles Grom said, referring to Wal-Mart’s program to offer 30-day prescriptions of some generic drugs for $4 in 27 states. “Moreover, provided the continued weakness in apparel sales, largely women’s, we remain concerned that Wal-Mart’s upcoming holiday could be weaker than expected.”
Wal-Mart’s November forecast cast a cloud over many of the retailer’s suppliers on Thursday. Of 104 publicly traded U.S. suppliers that derive more than 10% of their sales from Wal-Mart, 62 saw declines in their stock on Thursday, according to Revere Data LLC of San Francisco. Of the rest, 30 saw their stocks rise and 12 saw no change.