NEW YORK: Wal-Mart Stores, the world’s largest retailer, said US same-store sales fell 0.1% in November, the worst performance in more than 10 years, as holiday discounts on toys and electronics failed to lure customers.
December sales at stores open at least a year will rise between 0 to 1%, the company said Thursday. November marks the second month in a row that the retailer has reported sales of less than 1%. Since last month, Wal-Mart cut prices on toys, electronics, groceries & appliances and extended its $4 generic drug programme to all US pharmacies. At the same time, it has upgraded stores and merchandise to win affluent shoppers away from Macy’s and Target.
“They don’t have a cohesive strategy, they are flailing around,” said Patricia Edwards, a Seattle-based money manager at Wentworth, Hauser & Violich, with $8.2 billion in assets including Wal-Mart shares. “I think that there are many more Target shoppers and department-store shoppers than there were a year ago.”
November’s performance, which matched a preliminary estimate Wal-Mart provided November 25, is the worst since April l996, when same-store sales fell 0.6% after a shift in the timing of Easter. In November 2005, Wal-Mart’s US same-store sales increased 4.3% after shoppers restocked after hurricanes Katrina and Rita. Neil Currie, an analyst at UBS Securities in New York, was “somewhat surprised” by the company’s weak sales this month after it cut prices aggressively, he wrote in a November 27 research note. “Perhaps the multitude of rollbacks at Wal-Mart did not have the desired, broad shopping effect.”
Wal-Mart’s results probably pulled the expected November gain at US retailers down to 2.5%, the International Council of Shopping Centres and UBS said November 28. In October, Wal-Mart said disappointing clothing sales and renovations hurt sales, posting a 0.5% gain after initially forecasting a rise of 2-4%. Wal-Mart’s “upscale move may be alienating its core customer”, Charles Grom, an analyst at JP Morgan Securities said. The company is modernising more than half of its US 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.
However, overall US retailers may report a 2.5% rise in November sales, the smallest increase since March. Demand accelerated in the final week of the month with the start of the holiday shopping season, according to the International Council of Shopping Centres, which provided the November estimate. Most retailers will report sales today.
“The higher-end stores seem to be doing well because wealthy people are less susceptible to higher oil prices and interest rates,” said Matthew Kelmon, who helps manage $400 million, including Best Buy and Wal-Mart shares, at Kelmoore Investment in Palo Alto, California. “The people buying at Wal-Mart are squeezed.”