Wal-Mart can't stop US sales decline

The company relied on overseas business for its first-quarter profit. With video.

By Kim Peterson May 17, 2011 12:05PM
Wal-Mart's (WMT) U.S. sales slump is one of the worst in its history. Nothing the company tries here seems to work.

The retail giant reported a solid first quarter Tuesday, beating analysts' expectations with a 3.8% gain in profit. But the store relied on strong overseas business to overcome a sales drop in the U.S. that has stretched for eight straight quarters.

Meanwhile, other retailers in the U.S., including dollar stores and Target (TGT), are eating away at Wal-Mart's market share here. Wal-Mart executives said American shoppers are running out of money faster than before.

Post continues after this video of one investor discussing Wal-Mart's flaws:
"Our core U.S. customers are stretched," Wal-Mart's chief executive, Mike Duke, said in a call discussing the first-quarter performance. "They are concerned about rising gas (and) food prices and employment issues."

Investors weren't all that pleased with Wal-Mart's earnings news. The stock dropped 1% in morning trading to $55.47.

Wal-Mart said it has noticed a change in shoppers' spending habits. People are foregoing clothes and home furnishings in favor of buying more groceries, detergent and other household goods.

You'd think the opposite would be occurring. Wal-Mart, which touts its everyday low prices, would seem like the natural place for shoppers to turn to in an economic downturn. And, as it turns out, the average amount of money a shopper spends there is up from a year ago.

The real problem is that Wal-Mart is losing shoppers, and store traffic is down. People don't want to buy the bundled four-pack of air fresheners, for example, even though they are a better deal per unit. Instead, they just want to buy a single can for even less money.

Shoppers have turned to dollar stores and grocery stores for many of those single-unit household items, including detergent and tissues.

So Wal-Mart is changing its strategy for these new-economy shoppers. It's going to open more of its grocery-only Neighborhood Markets, which are much smaller than the typical Wal-Mart. It will also open Walmart Express stores for groceries and some other items. It's also adding more of the items people are buying, like groceries and household goods, to its regular stores.

In the first-quarter, U.S. same-store sales slid 1.1%, which is about what the company expected. Analysts were expecting a 1.3% drop. Bad weather kept some shoppers away, and others simply bought groceries and skipped other items like clothing.

Wal-Mart's profit was $3.4 billion, or 98 cents a share, in the quarter. That was slightly better than a year ago, when the company reported $3.3 billion, or 87 cents a share, in profit. Analysts were looking for 95 cents a share.

Sales came in at $103.4 million, higher than the $102.9 billion analysts wanted to see. That gain was largely thanks to international sales, which jumped 11.5%.

For the current quarter, Wal-Mart said it expects profit at $1.05 to $1.10 a share, up from 97 cents in the year-ago period. Analysts are expecting $1.08.

And will it end its losing streak in the U.S.? Even Wal-Mart isn't sure, saying U.S. sales could be anywhere from down 1% to up 1%.

And if international operations are where the money is, Wal-Mart is jumping in even more. The company will open more stores in China faster than it had originally planned. "The best thing they have going for them is the international side of the business," a retail consultant told Bloomberg.



VIDEO ON MSN MONEY

41Comments
May 17, 2011 12:25PM
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I stopped shopping at Wal-Mart and I transferred my prescriptions to another store about a year ago. I repeatedly felt frustrated at Wal-Mart because of unfriendly and unhelpful employees and quality of merchandise. Also, many of the items that could count on buying at my Wal-Mart were discontinued. I was a good and frequent customer. No more!
May 17, 2011 1:07PM
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Walmarts profits are down because people have taken their business elsewhere.  The customer service at Walmart SUCKS!!  The employees and managers are just rude as hell and if you ask anyone who works there for help, they will tell you flat out  that they are busy, gove you an attitude or just tell you that it is not their job.  If you ask for a manager, the manager will not even talk to you-they claim that they are too busy.

 

I have experienced this in Florida, Pennsylvania and New Jersey. Walmart stores  Horrible customer service is on top of their poor quality products.  In Super Walmart stores, the produce department sells rotten bug infested fruits and vegetables.  Themeat department does not even sell "real" meat, I am not sure what they call it, but it looks and tastes NOTHING like meat.  Just nasty!!!!

 

Products and Service at Walmart Suck!!!!!!!!! 

 

Forget going to a Walmart in Philadelphia, PA, the only ones who work there are rude ignorant african americans who all dress in muslim gear.  They will not even help you unless you are "ghetto african american" too.  I am talking about the Columus/Delaware Avenue location in South Philadelphia.  The health department needs to close that store down too.  

May 17, 2011 1:05PM
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Prices have gone up on there generic brands! Plain and simple, they are no longer price competitive.  Also, not to mention I'm sick and tired of buying "Made in China" crap!  99% of everything Walmart sells is!  The quality is horrible and the price ridiculous.  No wonder they are opening more stores in China - they have no shipping costs!!!
May 17, 2011 2:05PM
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I refuse to shop at Walmart because they refuse to support the USA.  Just try to find ANYTHING in that store that wasn't made on foreign soil.

May 17, 2011 1:24PM
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Serves them right. Sam Walton is still spinning in his grave. The new management got on the fast track to china and an arrogant attitude and their attacks against competition. They have basically ruined the competion with their tactics. Rest in peace Sam Walton as this is not your fault
May 17, 2011 2:11PM
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everyone is tired of buying non american made goods Walmart buys overseas now it's not the SAM era anymore it;'s all about money greed burn the bastards who head these companies that buy oversea BURN BABY BURN
May 17, 2011 1:48PM
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The only thing Wal-Mart had going for it was it's cheap prices. Those have been steadily increasing over the last year or so. So WM has gone from having the lowest prices in town on groceries to being somewhere in the middle of other grocery stores in my area. 

So to me I'd rather shop at a store that will give me good customer service, and good prices than one that has rude employees and some kind of sick fixation with moving it's products from one self to the other every month or so. 
May 17, 2011 1:26PM
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I work for Walmart and I think the real issues in my eyes the policies they have enacted over recent years. They have gotten rid of several products in favor of customer space, they have are sticking by a new and failing inventory system, ( if you havent noticed all the empty shelves lately) and on top of it all they have cut employee hours nearly in half ( so when you need help no one is around). Also the managers at the store level for the most part are terrible, but you get what you pay for. I believe if they just invested more in their employees and the customer things would get better. You have to spend money to make money and that is something walmart simply isn't willing to do.
May 17, 2011 12:57PM
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I took my business away from there because their customer service was deplorable and management was non-existent.
May 17, 2011 2:05PM
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I have shopped at Wal-Mart for over 3 decades.  I am so sad to see the way customer service has declined in the last decade.  They are getting rid of all the people that have been there for more than 15 years, because they don't do well in the new "no customer service" atmosphere.  When you spend twice as much time standing in line to pay for your items than it took you to pick them out after walking all over a super store, that is deplorable.  And the fact that a cashier almost never greets you and the people on the floor do not know what the 10-foot rule is, in my opinion, even more deplorable.  I go there only to get items I can't get else where, which is becoming less and less as they took away most of the off brand items I used.  Despite the articles touting that they were going to put these items back on the shelves 6 months ago, I have yet to see any of them reappear.  And the price of the off brand items have gone up and up and up.  The meat just isn't worth buying anymore.  I pay anywhere from $0.25 to $0.50  per pound more for meat at other stores, just because it tastes better.  Sam Walton must surely be spinning in his grave, he was all about the customer and respect for the individual.
May 17, 2011 1:46PM
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Attitude sells,Bad attitude sends customers someplace else. Too bad this bunch can't seem to get the message. Hopefully they will when it is too late.
May 17, 2011 2:29PM
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What ever happened made in the USA campaign all they sell now is that cheap made in China crap and dont even have enough people to check you out, walmart sucks.
May 17, 2011 2:23PM
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Think  of all the small chains that have been beaten into the ground. Montgomery Wards,W.T.Grants,Woolworths,Kresges,and on and on. All because they were honest merchants and did not rely on underhanded tactics as walmart, only basically honest advertising and prices people could afford with clerks that knew if they were not polite with the customers they would be out the door. All this created customer loyalty. walmart is running out of new customers and it serves them right.
May 17, 2011 12:55PM
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I'll tell you why Wal-Mart sales are declining, they have RAISED THEIR PRICES for their no name merchandise to almost the level of their name brand competitors.  The only bargains at Wal-Mart now are in the grocery isle and they are rapidly disappearing too.  I used to but everything at Wal-Mart because they were the lowest, not anymore.  Bye-bye Wal-Mart. 
May 17, 2011 1:19PM
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Serves them right. Sam Walton has not stopped rolling in his grave ever since his replacements took the path to china. I quit them a few years ago when their poisoned dog food killed our pet. So when they die it will be poetic justice.
May 17, 2011 2:56PM
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lousy stores + crappy service + cheap chinese junk = Walmart

 

 

 

 

May 17, 2011 1:30PM
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When Ratmart is gone maybe the overall economy will improve when American manufacturers can come back into the picture. Maybe the prices may be higher but remember people with money buy. People without money go to Goodwill
May 17, 2011 2:34PM
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I HATE Wally World!!! I do everything to avoid that place!!!
May 17, 2011 2:39PM
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Wal Mart puts good businesses selling quality products out of business and replaces them with cheap, foreign made goods. Being the #1 retailer in the United States, they've done a lot of the work making sure cheap is more important than good. I'd rather spend more on a quality product that I don't have to replace rather than consistently purchasing cheap goods. In the long run, it doesn't add up the consumer's favor.

Good, fast and cheap... you can only have two. 
May 17, 2011 2:03PM
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I avoid our local Wal-Mart because of the inconsistent customer service in the checkout lanes, as well as the crowded aisles.  I also dislike walking 2 miles to buy a bottle of shampoo and a gallon of milk.  It is much easier to hit the neighborhood Dollar General and be in and out in less than 5 minutes for about the same price.  Wal-Mart may have it right by reducing the "super" and making their stores more user-friendly.

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