Wal-Mart may be its own worst enemy
It's blaming a weak outlook on consumers cutting back. But then why are so many of its retailing rivals doing just fine?
When the U.S. economy started to tank, the Bentonville, Ark., company's low prices attracted cash-strapped consumers. But now, as the economy continues to rebound, consumers may be less worried about prices and more attuned to other aspects of their shopping experience such as customer service, which has never been a forte of Wal-Mart.
According to Wal-Mart, many people continue to struggle because of the rise in the payroll tax and delays in getting tax refunds from the IRS.
Wal-Mart's gloomy outlook confirms the sentiment echoed in internal memos recently leaked to Bloomberg News about the chain's poor performance in February. The company's forecast for first-quarter earnings was below Wall Street expectations, but the shares are trading up so far today. Raising its dividend by 18%, to $1.88 annually, is offsetting some worries about Wal-Mart's gloomy forecast.
Wal-Mart expects comparable sales to be flat in the current quarter as uncertainty about the economy continues to weigh on it. The Associated Press reported today that the number of Americans seeking unemployment benefits rose in the most recent week. Consumer confidence also declined in January.
These macroeconomic forces affect all retailers, but many are doing better than Wal-Mart.
Its chief rival Target (TGT) recently reported a better-than-expected 3.1% gain in January sales in stores opened at last a year. Comparable sales at TJX (TJX) rose 3% during the same time, exceeding the expectations of the parent company of TJ Maxx, Marshall's and Home Goods. Macy's (M), an up-market department store chain, recently reported that January same-store sales rose a better-than-expected 11.7%. (Wal-Mart doesn't report monthly sales.)
If Wal-Mart continues to struggle, investors may find it hard to believe that the fault lies entirely with penny-pinching consumers.
Jonathan Berr is long Target. Follow him on Twitter @jdberr.
Wal-Mart has consistently violated major labor laws and nobody is ever held accountable for this. We now live in a world that is comfortable with zero accountability. I am done shopping there. The only reason I do, is because I am the needy that Walmart is targeting, and they make it easy to buy anything you want for 35 percent of its marked retail price, but that's my only motivation for going there. I am so done hearing about how money is more important in this country than the way we treat our employees. Sooner or later, I am boycotting this place, and shopping at Target instead. Target has an excellent market of customers and they don't treat their customers like crap either. They hire nice people, and responsible managers. They don't finagle and they don't nickel and dime. Walmart is going to be the victim of its own demise.
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