Wal-Mart Stores Inc., the world’s largest retailer, said it might post the smallest December sales gain since 2000 following its worst monthly performance in more than a decade.
November U.S. sales at stores open at least a year fell 0.1 percent as holiday discounts on toys and electronics failed to lure customers. December same-store sales will rise between 0 to 1 percent on continued weaker results from its home goods and clothing lines, the company said today in a statement.
Wal-Mart’s two-month holiday projections trail the overall industry, which is expected to gain 2.5 to 3 percent. Shoppers are heading to Target Corp. and moderately priced department stores such as Kohl’s Corp. that offer exclusive clothing, said Patricia Edwards, a Seattle-based money manager at Wentworth, Hauser & Violich. Companies are also matching its lower prices.
“They don’t have a cohesive strategy, they are flailing around,” said Edwards, who helps oversee $8.2 billion in assets including Wal-Mart shares. “Price is not the main thing to compete on right now, it’s product differentiation.” Wal-Mart’s home and clothing lines are “challenging” and will continue to be so through the fourth quarter, Eduardo Castro-Wright, U.S. stores chief, said in the statement.
Food outsold general merchandise even as sales of items such as high-definition televisions and computers the day after Thanksgiving made electronics one of the month’s strongest categories, the company said.
Shares of Bentonville, Arkansas-based Wal-Mart, which has more than 3,900 U.S. stores, fell 78 cents, or 1.5 percent, to $46.11 at 11:27 a.m. in composite trading on the New York Stock Exchange. They have declined 1.5 percent this year.
November Performance November’s performance, which matched a preliminary estimate Wal-Mart provided Nov. 25, is the worst since April l996, when same-store sales fell 0.6 percent after a shift in the timing of Easter. In November 2005, Wal-Mart’s U.S. same- store sales increased 4.3 percent after shoppers restocked after hurricanes Katrina and Rita.
In December 2005, Wal-Mart reported a 2.2 percent gain. An increase of up to 1 percent next month might be the worst December performance since 2000, when same-store sales rose 0.3 percent.
In its forecast for next month, Wal-Mart cited last year’s hurricanes as a factor, as it had for October and November. That explanation “is getting tedious,” said Bernard Sosnick, an analyst at Oppenheimer & Co.
“Flattish December sales would mean the huge effort to upgrade the shopping experience would not produce the benefit in the fourth quarter that had been expected,” he wrote in a report today. Sosnick, based in New York, rates shares “buy” and doesn’t own any.
Fourth-Quarter Estimates Sosnick cut his fourth-quarter earnings estimate by 2 cents to 88 cents a share. Wal-Mart on Nov. 14 forecast a range of 88 cents to 92 cents based on a same-stores sales gain in the quarter of 1 percent to 2 percent. Analysts surveyed by Thomson Financial are estimating an average of 90 cents.
Industrywide same-store sales are projected to increase 2.5 to 3 percent for November and December combined, below a previous forecast of 3 percent, the International Council of Shopping Centers said today.
Wal-Mart’s results pulled the November gain at U.S. retailers down to 2.1 percent, ICSC said today. Excluding Wal- Mart, comparable-store sales at the 52 chains tracked by the New York-based trade group rose 4 percent.
Cutting Prices November marks the second month in a row the retailer has reported sales growth of less than 1 percent. Since last month, Wal-Mart cut prices on toys, electronics, groceries and appliances and extended its $4 generic drug program to all U.S.
pharmacies. Wal-Mart today said prescriptions posted comparable sales gains in “the mid teens” on a percentage basis this month.
In October, Wal-Mart said disappointing clothing sales and renovations hurt sales, reporting a 0.5 percent gain after initially forecasting an increase of 2 percent to 4 percent.
The company is modernizing more than half of its U.S. Wal- Mart stores. Wal-Mart finished the first round of 1,200 stores this month and will begin work on the remaining 600 in February.
Metro 7, a clothing line it introduced in October 2005, initially sold well, then faltered when the company added it to more stores. Wal-Mart is now removing the collection from up to 700 stores, leaving it in 800 to 900, Chief Financial Officer Tom Schoewe said in an interview earlier this month.
Target Corp., the second-largest U.S. discounter, today said its November comparable-store sales gained 5.9 percent. It forecast a 3.5 percent to 5.5 percent increase for December. Target’s same-store sales have outpaced Wal-Mart’s in 12 of the 15 previous quarters.
