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Wal-Mart misses January sales mark


The surprisingly weak January sales results Wal-Mart reported Thursday can be viewed as disturbing on a number of levels. For starters, the performance of Wal-Mart’s U.S. stores division, more so than any other retailer, is closely watched as a national economic indicator because it provides broad-based insight into the health of the consumer. As such, it is unsettling that Wal-Mart’s U.S. stores eked out a 0.2% same-store sales increase when the company was expecting a 2% increase for the reporting period ended Feb. 1.

Equally disturbing is what the missed same-store sales estimate says about the pace at which consumers curtailed spending during January. Wal-Mart provided its January same-store sales guidance on Jan. 10, when it announced December 2007 same-store sales that were surprisingly strong at 2.6%. At the time, Wal-Mart already knew what its sales were for nearly one-third of the month when cfo Tom Schoewe said, “During the first two months of the quarter, our comparable-store sales number for U.S. operations has run at about 2%. We expect to run at a similar rate for the January four-week sales period.”

Apparently, sales decelerated rapidly from Jan. 10 through Feb. 1, when the four-week January reporting period ended. The company cited the familiar culprit of unfavorable weather conditions, especially in the Midwest, as contributing to the weakness, and also indicated that gift card redemptions took place at a slower rate during January. It also noted that consumers turned defensive in their purchasing behavior with more gift cards being used to pay for food and consumables purchases rather than more discretionary big-ticket items.

Another possibility for January sales could relate to a reliance on flawed assumptions, certainly with regard to the U.S. consumer, but also as it relates to the effectiveness of merchandising and marketing initiatives. Customer-facing efforts, whether at Wal-Mart or any other retailer, typically gain traction at a slower pace than anticipated by senior management

Despite coming up short against a monthly same-store sales target, it’s worth mentioning that earnings per share guidance for the fourth quarter were unchanged at 99 cents to $1.03.

“Our inventory position remains very good across the country, which has resulted in fewer sales from clearance items than the same period last year,” said Eduardo Castro-Wright, president and ceo of the retailer’s U.S. stores division.

The company will report results for the fourth quarter and full year ended Jan. 31 on Feb. 19, and when it does, sales are expected to increase more than 8% to roughly $375 billion and profits should hit record levels with full-year net income expected to exceed $12.5 billion.

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