Wal-Mart warning unsettles retailers
NEW YORK — Wal-Mart’s holiday sales used to be the retail industry’s gold standard.
Through a mixture of bad judgment and economic woes like a crumbling housing market and higher gas prices, Wal-Mart Stores Inc. tripped this year. And its fall is sending shock waves throughout the industry as it heads into the last few weeks of holiday shopping.
Wal-Mart on Thursday reported a sales decline for the first time in 10 years and warned that its holiday sales would be disappointing. At the same time, the government had worrisome news on jobs, saying unemployment benefit gains jumped to the highest level since October 2005.
Many retailers probably didn’t want to hear the messages from Wal-Mart and the Labor Department because they may spell trouble for them, too.
Industry analysts generally believed the world’s largest retailer is struggling with its own internal problems, not an industry-wide malaise. But bad news for Wal-Mart, which promised more aggressive discounting on holiday merchandise, means intensified price wars, and lower profit margins, as other merchants slash their prices to compete.
“This is pretty discouraging,” said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass.
Wal-Mart’s confirmation of weak November sales and its announcement that its December same-store sales gain would be no better than 1 percent came as the nation’s retailers reported an overall mixed performance for the month. Same-store sales reflect business at stores open at least a year and are a widely followed meaure of a company’s strength.
Wal-Mart’s disappointment was a sharp contrast with results from discount rival Target Corp. and Federated Department Stores Inc., which exceeded expectations. Other retailers had mixed sales; J.C. Penney Co. and Costco Wholesale Corp. both fell short of Wall Street projections.
The timing of Wal-Mart’s news couldn’t have been worse, coming just after the start of holiday shopping. While many retailers had a strong Thanksgiving weekend, Wal-Mart said Saturday its November sales would be weaker than expected.