Wal-Mart Falters In Latest Retail Report

(CBS/ AP)  Retailers reported dismal sales figures for December on Thursday as even Wal-Mart Stores Inc., one of the bright spots in the industry, finally buckled under the pressures of the deteriorating economy.

As merchants reported their sales figures, confirming fears that the holiday season was the weakest in four decades, the malaise cut through practically all areas from kitchen gadget stores to jewelry purveyors and teen apparel retailers.

The deep discounts that began well before the official start of the holiday season spurred a number of merchants to cut their earnings outlooks on Thursday, fueling more concerns about the health of the industry.

Among the many retailers that reported steep sales declines were Sears Holdings Corp., which operates Kmart and Sears stores, luxury retailer Saks Inc., Gap Inc., Abercrombie & Fitch Co. But the biggest surprise came from Wal-Mart, the world's largest retailer, which posted a smaller sales gain than what Wall Street expected and cut its fourth-quarter earnings outlook.

"This suggests that the lower income group is feeling the pinch more than we thought and this is clearly reflected in the lower-than-expected numbers at Wal-Mart," said Ken Perkins, president of research company RetailMetrics LLC. "I think it says the economy is in more dire straits than we thought."

(AP / CBS)

Wal-Mart, blaming the weak economy and severe winter conditions, said that same-store sales, or sales at stores opened at least a year, rose 1.2 percent. Excluding the impact of declining gasoline prices at the pump, the gain was 1.7 percent. Analysts surveyed by Thomson Reuters had expected a 2.8 percent increase, excluding fuel.

"The current economy remains challenging for all businesses, and retailers have already seen customers pull back on discretionary spending," Wal-Mart's Chief Financial Officer Tom Schoewe said in a statement. "Consumers are very focused on value and necessities."

Wal-Mart noted that health and wellness items were the categories that primarily fueled sales. Electronics sales were solid, while the apparel and jewelry business was weak.

Given the disappointing sales and higher-than-anticipated expenses, Wal-Mart said it now expects to earn 91 cents to 94 cents per share in the fourth quarter from continuing operations. That's down from its previous projected range of $1.03 per share to $1.07 per share. Analysts surveyed by Thomson Reuters expected $1.06 per share.

Meanwhile, Costco Wholesale Corp. reported a 4 percent decline in same-store sales, but excluding the impact of lower gas prices and currency fluctuations, it actually posted a 4 percent gain. Lower gas prices are good for consumers, but reduce the sales volume for retailers like Costco.

Among department stores, Sears Holdings said its December same-store sales dropped 7.3 percent, weighed down by a 12.8 percent drop at domestic Sears stores. The company, whose brands include Kenmore and Craftsman, said Kmart same-store sales fell 1.1 percent.

Macy's Inc. reported that same-store sales fell 4 percent in December, less than the 5.3 percent decline that analysts had expected. For the combined November-December period, same-store sales were down 7.5 percent. But the department store chain cut its fourth-quarter and full-year earnings outlook due to heavy markdowns and announced plans to close 11 underperforming stores. The chain operates more than 840 Macy's stores.

Luxury retailer Saks Inc., which operates Saks Fifth Avenue, fared far worse, as affluent shoppers were spooked by the financial meltdown that resulted in massive layoffs on Wall Street and shrinking investment portfolios. Same-store sales dropped 19.8 percent for the month, worse than the 10 percent drop that Wall Street expected.

Limited Brands Inc. posted a 10 percent drop in same-store sales, larger than the 7.8 percent decline analysts predicted. The company also lowered its fourth-quarter earnings outlook.

Gap Inc. suffered a 14 percent drop in same-store sales, worse than the 9.3 percent decline that analysts had expected. It also cut its earnings outlook.

"Customers waited until late in the month to shop and we faced a highly competitive promotional environment," said Gap's Chief Financial Officer Sabrina Simmons.

Teen apparel retailers also suffered through a miserable holiday season. Wet Seal Inc. reported a 12.5 percent decline, larger than the 11.9 percent analysts expected, as its Arden B chain dragged down results. Abercrombie & Fitch Co. reported a 24 percent drop, in line with the 23.5 percent drop analysts had forecast.

Kitchen gadget chain Williams-Sonoma Inc., which didn't break out December figures, said its same-store sales dropped more than 24 percent for the eight-week period ended Dec. 28 and warned its fourth-quarter profit will likely come in at the low end of expectations.

In other dismal economic news, new claims for unemployment benefits dropped unexpectedly last week while the number of people continuing to seek aid rose sharply, the government said Thursday.

The Labor Department reported that initial applications for unemployment insurance dropped by 24,000 to a seasonally adjusted 467,000 for the week ending Jan. 3. Wall Street economists expected initial claims to increase to 540,000. The figure partly reflects seasonal volatility that occurs around the New Year's holiday.

The unemployment data comes as President-elect Barack Obama prepared to deliver a pre-inauguration speech on the economy, hoping to drum up support for his multibillion stimulus plan. Obama said the nation's recession could "linger for years" unless Congress acts, according to the text of the speech to be delivered at George Mason University in Fairfax, Va.

[rickwar]

Ah yes - you are all business geniuses and I bow to each of you - NOT!!!!!

For those of you who don''''t get the concept, Wal-Mart is a perfect example of the best business model - sell for less, sell more, beat out your competition.

Posted by ndg1979 at 12:33 AM : Jan 09, 2009

Don''t know what business school you went to or if you own or manage a business. This is NOT how you run a decent business. Price is not the only competition area, service, quality, VALUE as opposed to PRICE.

And-- in case you haven''t noticed, SOME prices are lower, it''s a typical shell game. Plant the seed it''s cheaper, put a smiley face on it and the morons will believe it. Let''s face the majority of America has.
And sadly many like yourself believe this is a great business model.

[rickwar]

This one statement isn''''t necessarily true. At least not here, it isn''''t.

Unless you are shopping at a VERY high end store, Wal-mart carries all the same brands as most other stores.
And they can be $5 to $10 cheaper.

The QUALITY is the same as most stores.



Posted by erasmus606 at 03:03 PM : Jan 08, 2009

Actually it''s been proven that your statement is incorrect. Many WalMart "items" are not avaliable at other retailers and normally the bottom of of the companies lines and overproduction models. Also you are hard pressed to get any direct service from WalMart and the help is generally a group of know nothing part time help.

You might want to try being on WalMarts supply side---I was about 12 years ago and it isn''t pretty, they ground price into the ground, required, their computer equipment (even though it was basic)charged a ton for it, pay periods typically ran 120 days. We put up with it for a year, they came to us and said match this price. The pricing was from a Chinese factory. We told them to take a hike. They did, when we got the "replacement item" it was made of thinner product, had a seam that was prone to leak and a top that would strip the threads, we passed it on to the feds, it didn''t meet safety requirements, guess what, they still are selling the same product today, and consumers are soooooooo happy to save a buck.

Keep believing the BS, it''s the American way.

[greeneyes222]

"For those of you who don''''t get the concept, Wal-Mart is a perfect example of the best business model - sell for less, sell more, beat out your competition. This is simply Business 101." ndg1979 at 12:33 AM

Not business 101 when they offload healthcare onto the states'' Medicaid systems so that even those of us who don''t shop there must pay for it; not business 101 when they compete unfairly; not business 101 when they want you to give up your personal info like social security number to use one of their gift cards; not business 101 when they encourage slave labor.

There are a lot of hidden costs associated with WalMart, and those costs aren''t good for the country.

Sam was an honorable man, but since his death that company has turned into a blight that destroys.

[gocubs58]

Want to save America, buy American.

Want to kill America''''s economic future, keep shopping at Wal-mart.
Posted by notfooled
-----

Isn''t it ironic that Sam Walton''s main focus was "Buy American" - the man must be turning in his grave. I hate Walmart - they are nothing but a big warehouse full of cheap chinese cr@p. I hope they go broke. Want to destroy main street in your community? Build a Walmart.

[themooniac]

the sooner the end of WalMart the better.

[ndg1979]

Ah yes - you are all business geniuses and I bow to each of you - NOT!!!!!

For those of you who don''t get the concept, Wal-Mart is a perfect example of the best business model - sell for less, sell more, beat out your competition. This is simply Business 101. I do agree it is unfortunate that this has had to come at a cost of other businesses and jobs, and like any other chain store - full-time employees DO NOT earn close to a cost-of-living salary.

Employee labor hours have been cut at Wal-Mart stores across the board and health care costs have gone up. As for the quality of goods in the stores - take surround sound systems for example - THEY ARE THE SAME AS AT BEST BUY or anyplace else. Quality is not less just because it is Wal-Mart. Go to Best Buy and look at the backs of home theater amplifiers - ALL BRANDS ARE MADE IN EXACTLY THE SAME FACTORIES.

Like any big-box retailer, Wal-Mart is both good and bad for America. This issue is not one sided. I should know - I work for Wal-Mart. Now kids, let mommy and daddy have the computer back, it is bed time.

[treknutz]

erasmus606,

Once again, what rock do you live under? Many items at Walmart are different in quality than the ones found in higher end stores. That has been the case for years and it is not just Walmart. Not sure of now, but in the past, big boxes were given taiwan made cameras while specialty stores were buying the Japanese made cameras. There is a difference in quality. The same can be be said for televisions.

Posted by au_fait

Hey au_fait,

Obviously this clown never bothered to look up the definition of "Gray Market". Another idiot blinded by stupidity in consumer fraud perpetrated by the one and only godfather of "Gray Market", Ronald Reagan!

[runningralph]

Big box stores are a product of cheap transportation. If the cost of fuel gets high enough or something else changes the US worship of automobiles retailing will go back to neighborhood stores.

[treknutz]

Gee, the hillbilly general store only made 1 percent over last year....I''m suprised they didn''t ask their employees for give backs, or did they?

They are the worst employer of the last century and the worst of it is they have so many people fooled. How can so many in a supposed educated nation be so ignorant of this company and it''s criminal ways.

[notfooled]

Except for the Bush/Cheney crime syndicate I normally don''t wish for bad things to happen to folks.

However, in Wal-Mart''s case, I can only hope all their stores have to file bankruptcy as these folks are at the heart of America''s problems.

Since Wal-Mart doesn''t have any patriotism towards America by selling 3rd rate products from overseas helping the politicians eliminate all the manufacturing jobs here, I''d like to see everyone of their stores boarded up and vacant.

Want to save America, buy American.

Want to kill America''s economic future, keep shopping at Wal-mart.