Wal-Mart Adjusts Sales Outlook
Wal-Mart Stores Inc. on Monday said December sales would probably reach only the lower end of its forecast as more people delayed holiday shopping or bought plastic gift cards, sending its shares down more than 3%.
The gloomier outlook from the world’s biggest company cast further doubts on U.S. consumer spending in the holiday shopping season and supported claims that a recovering U.S. economy was helping wealthier households more than lower-income families.
Bentonville, Ark.-based Wal-Mart said the number of shoppers at its stores last week declined from a year earlier, which it attributed to a trend toward later holiday sales.
It now expects sales at stores open at least a year to reach only the lower end of its forecast for 3% to 5% growth this month.
The outlook prompted some Wall Street analysts to trim their sales estimates and heightened concerns about fourth-quarter earnings prospects.
U.S. consumers, accustomed to last-minute bargains, have been waiting until just before Christmas to finish holiday shopping.
The day after Thanksgiving used to be the biggest shopping day of the year, but in recent years the Saturday before Christmas has earned that designation.
The popularity of gift cards, which can be redeemed for merchandise, has added to the last-minute trend and skewed retailers’ results because they do not record the revenues until the cards are used.
Many cards are redeemed in January, and some analysts expect that to boost after-Christmas sales.
Many analysts still expect overall holiday sales to show a 5% to 7% increase over last year as a strengthening economy lifts consumer sentiment and spending.
News of former Iraqi President Saddam Hussein’s capture over the weekend is expected to give a further lift to consumer confidence.
But Wal-Mart has tried repeatedly to damp expectations for a blockbuster holiday season, noting that its customers were still buying the lowest-priced items available and holding off on nonessential purchases.
Prudential Securities retail analyst Wayne Hood said some analysts may trim their fourth-quarter earnings forecasts for Wal-Mart because of the slower sales, although he maintained his estimate of 63 cents a share.
Hood lowered his December same-store sales forecast for Wal-Mart to 3.1% from 4.1%.
December is the biggest shopping month of the year. Last year, Wal-Mart recorded only a 2.3% gain in December same-store sales.
Wal-Mart shares fell $1.76, or 3.4%, to a nine-month low of $50.74 on the New York Stock Exchange, and most other retailing stocks also declined Monday.
