As Wal-Mart Cuts Staff, Supplier Says U.S. Retailers Expect 15 Percent Plus Sales Declines

Bruce Rockowitz, the president of Li & Fung, a major supplier to retail chains in the United States including Wal-Mart and Target, said his U.S. customers are planning for their sales to slide 15 percent to 20 percent this year.

On the same day Rockowitz was commenting, Wal-Mart told employees it was cutting up to 800 headquarters jobs in merchandising, real estate, marketing and support divisions. The lay offs will affect both the Wal-Mart and Sam's divisions, but won't spread to stores, Mike Duke, Wal-Mart's new CEO said in a memo circulated Tuesday. However, today, a local news report said that Wal-Mart planned to close a Georgia return center, a move that affects another 400 employees. The Wal-Mart headquarters notice comes only two weeks after Target announced it would fire 600 employees and leave 400 open jobs unfilled.

Overall Li & Fung, which offers low-priced toys, apparel and other merchandise, has been fairing relatively well in the recession, particularly in terms of market share gains, Rockowitz told Bloomberg in Hong Kong. It's LF USA division reached a goal of $1 billion in U.S. sales in 2007, providing a mix of private label and licensed products to American retailers. The company's goal is $4 billion in U.S. sales by 2010, although it recently began reviewing operations as a prelude to targeted cut backs based on softer sales in the recessionary global economy.

Rockowitz said affluent shoppers and higher end retailers had been bearing the brunt of the recession initially, which precipitated a sales shift to Li & Fung customers, but he cautioned that his discount store and other mass market customers have been taking steps to deal with lower consumer spending and rising unemployment, which he predicted could reach 10% in the U.S. Inventory cut backs, he said, had started impacting Li & Fung.

While Rockowitz didn't break out the sales expectations of specific companies, his observation and the actions taken by the major players are another indication that retailers aren't expecting consumers to start spending more in their stores during 2009.