Wal-Mart execs see 'total disaster' in February sales

An internal memo says higher payroll taxes and delayed tax refunds are killing early sales for the month. The shares are the biggest drag on the Dow.

By Charley Blaine Feb 15, 2013 4:35PM
© Carlos Barria/REUTERSUpdated: 4:40 p.m. ET.

Wal-Mart Stores
(WMT) shares slid Friday afternoon after Bloomberg News reported that the retail giant had its worst monthly sales start in at least seven years as payroll-tax increases hit shoppers already battling a slow economy.

"In case you haven't seen a sales report these days, February MTD (month-to-date) sales are a total disaster," Jerry Murray, Wal-Mart’s vice president of finance and logistics, said in a Feb. 12 email to other executives. "The worst start to a month I have seen in my ~7 years with the company."

Wal-Mart had been expecting a strong start to February because of the Super Bowl, milder weather and paycheck cycles, according to the minutes of a Feb. 1 officers' meeting Bloomberg obtained. January sales had disappointed as well.

The shares closed down $1.52 to $69.30 after falling to as low as $68.13. The shares had fallen 57 cents to $70.82 on Thursday.
Wal-Mart was the worst performer among the 30 stocks in the Dow Jones Industrial Average ($INDU) for the day and for the week. The index closed up 8 points to 13,982 on Friday but ended the week off 11 points.

Wal-Mart subtracted 12 points from the Dow on the day and 17 points for the week.

Wal-Mart and discounters such as Family Dollar Stores (FDO) had been worrying that the higher payroll tax would take a bigger bite from the paychecks of shoppers already dealing with high unemployment. The nation's Social Security tax rate had climbed to 6.2% on January from the 4.2% rate that had been temporarily in place in 2011 and 2012.

In addition, the Internal Revenue Service didn't begin processing income-tax returns until the end of January because Congress didn't approve tax-rule changes until Jan. 2. The approvals were delayed as Congress and the White House haggled over the fiscal cliff.

The combination of higher payroll tax and delayed tax processing is believed to have dampened retail spending in January. The Commerce Department sales had risen just 0.1% in January over December but were up 4.4% from January 2012.

A number of companies have been complaining about slower sales as 2013 begins, citing the higher payroll tax and the tax-refund delays. What's not clear is if the declines are temporary and will weigh on the economy.

For Wal-Mart, January was a month to forget as well, Bloomberg said.

"Have you ever had one of those weeks where your best-prepared plans weren’t good enough to accomplish everything you set out to do?" Cameron Geiger, senior vice president of Wal-Mart U.S. Replenishment, asked in a Feb. 1 email to other executives. "Well, we just had one of those weeks here at Walmart U.S. Where are all the customers? And where’s their money?" 

A Wal-Mart spokesman would not comment on the emails except to say, "As with any organization, we often see internal communications that are not entirely accurate, that lack the proper context and represent individual opinions.” David Tovar noted the company will report fiscal-fourth quarter results before Thursday open.

Wal-Mart shares had already been struggling Friday on news that its Asda supermarket subsidiary in Britain had pulled its inventories of fresh beef bolognese sauce from its 500-plus stores after tests of the sauce showed traces of horse meat.

Europe has been reeling from a broadening scandal over food inspections after tests showed in many countries that what was supposed to be hamburger and other beef products turned out to be beef with horse meat or just plain horse meat.

Some tests also showed traces of the equine pain killer phenylbutazone, or bute, in the burger. At the very least, horse meat sold for human consumption can't contain any bute in Europe, according to the Guardian newspaper.

Asda and 10 other British food retailers on Friday in publishing a public letter on Friday stating that they shared food shoppers' "anger and outrage"

The United States no longer slaughters horses or imports horse meat from other countries, ABC News said.

More on moneyNOW

374Comments
Feb 15, 2013 5:25PM
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Wal mart is one or the worst places to work anywhere.  A large percentage of their workers are on welfare of some sort....and ppl blame it on our President.  Blame who needs to be blamed ppl...and thats these places that make tons of money and cheat their employees out of good pay and benefits when they could easily pay them better.....its called GREED!
Feb 15, 2013 5:20PM
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So giving all that money to the Have Nots has caused tis.  They only have so much and you gave them more. But because you gave them more and then took it back away in taxes, the Have Nots don't have any more money to spend at Walmart.  Had they of left the money in the hands of the Haves it woul dhave been spent properly and Walmart would not be suffering so.  Maybe redistribution doesn't work as well as Obama hoped. At least for Obama. Guess the Haves will be bailing out Walmart tomorrow.
Feb 15, 2013 5:10PM
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Its about time some wheels started falling off the wagon everyone wants to ride, but nobody wants to push.
Feb 15, 2013 5:07PM
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So the cause of death of so many mom and pop stores now has their turn to suffer failing profits. Possiblt karma for the way they treat employees? Sam Waltonis rotatingin his grave
Feb 15, 2013 5:06PM
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So.....if they blame the increase back to 6.2% on SS taxes, then what will happen when minimum wage goes to $9.00/hr. ?

Same difference ??

Just asking................................

Feb 15, 2013 5:00PM
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Awwww, I feel so bad for Wal-Mart -- NOT!
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