From the Wall Street Journal:
Wal-Mart Stores Inc. posted a same-store sales gain of 2.2% for January, beating its own conservative projection, but capping a lackluster fiscal year.The retailer had predicted a gain of 1% to 2% for the five-week period ended Feb. 2 over the same span a year earlier. The January result is the latest in a string of paltry monthly results, including a 1.6% gain in December, a 0.1% drop in November and a 0.5% gain in October.
Wal-Mart's latest fiscal year, which ended Jan. 31, is shaping up to deliver the lowest annual same-store sales gain in the 27 years the Bentonville, Ark., company has reported such figures. Through December, it was tracking at a 2% gain for the year.
"Overall, while certainly a step in the right direction, particularly in light of the company's management changes a few weeks back and well-documented challenges, Wal-Mart is still not out of the woods, in our view," Charles Grom, an analyst with J.P. Morgan & Chase Co. unit JP Morgan Securities, wrote Saturday in an e-mail. "And [it] will continue to face an uphill battle versus Target and other moderately priced department store chains."
Among Wal-Mart's recent executive shifts in recent weeks was moving Chief Marketing Officer John Fleming into a top merchandising role.Same-store sales figures chart sales trends at stores open for at least a year, providing insight into a retailer's gains or losses against the relatively fixed costs of operating established stores. They are an important indicator of a retailer's return on the money spent on stores, which in turn reflects on overall profitability. Many U.S. retailers plan to release January sales results Thursday, and Wal-Mart will provide a final, more comprehensive view of its results at that time.
January typically isn't a big month for Wal-Mart, accounting for 6.5% of its total sales over the past five years, according to Mr. Grom. It is a month in which retailers often attempt to clear out leftover holiday merchandise and reap sales from redemptions of gift cards bought in December.
While slight at just 2.2%, Wal-Mart's latest monthly gain still had a high hurdle to clear: In last year's period, the retailer notched a 5% gain.
Wal-Mart's weak results can be traced to several factors, many of which analysts don't expect to abate this year. The retailer has blamed its efforts to remodel sections of 1,800 stores this year and last for disrupting shoppers and driving some away.
At last public notice, Wal-Mart planned to overhaul apparel sections in nearly as many stores this year -- 451 -- as it did last year, when it made the changes at 461 stores. And it plans to overhaul home-décor sections in more stores this year -- 170 -- than last, when it made changes at 54.
Perhaps most significantly, the retailer has opened most of its new stores in recent years in urban and suburban markets, where it faces stronger competition and where shoppers aren't as enamored of its low-price merchandise as are those in its rural strongholds.
As well, Wal-Mart's effort last year to lure more trendy, affluent shoppers by airing commercials with lifestyle themes rather than trumpeting low prices yielded uneven results and has been toned down.
Beginning with its February results, Wal-Mart will switch to reporting on the first Thursday of the following month along with most other retailers.
Posted by Laura - February 5, 2007 11:52 AM - In The News