Wal-Mart shares drop on report of inventory cuts

Bloomberg News says the retail giant is telling suppliers it's trimming inventory buying because consumers are still reluctant to spend big.

By Charley Blaine Sep 25, 2013 3:38PM
Wal-Mart cart © Carlos Barria/REUTERSUpdated: 4:38 p.m. ET

The word for Wednesday was Wal-Mart, as in Wal-Mart Stores (WMT).

The shares briefly dropped as much as 3% Wednesday after Bloomberg News reported that the discount colossus had told suppliers it is cutting orders for the balance of the third quarter and the fourth quarter. Between 1:25 p.m. ET and 1:40 p.m., the shares fell nearly 1%.

They rebounded off their low of $73.56, but still closed down $1.10 to $74.65. The stock had the largest percentage decline among the 30 stocks in the Dow Jones Industrial Average ($INDU).

The blue chips closed down 61 points to 15,273, their fifth loss in a row. The Standard & Poor's 500 Index ($INX) was off 5 points to 1,693, its fifth straight loss as well.  The Nasdaq Composite Index ($COMPX) dropped 7 points to 3,761, its third decline in four sessions.

Wal-Mart's issue is that inventories grew 5.5% in the fiscal-second quarter to $42.8 billion, and the company has acknowledged that consumers aren't spending as much as expected in Wal-Mart stores. The company has insisted that consumer spending has been trimmed this year after Congress boosted the payroll tax by two percentage points.

Plus, Bloomberg wrote, "the company has forfeited some sales because it doesn't have enough workers in stores to keep shelves adequately stocked."

Problems with stocking has been a longstanding complaint about Wal-Mart.

The warning about lower purchases may be the first ever, a supplier told Bloomberg.

Wal-Mart spokesman David Tovar told Bloomberg that the order cuts are not across the board. Instead, it's occurring "category by category," he said.

Wal-Mart was worth 7 points of the Dow's loss on Wednesday. Visa (V), which joined the Dow only this week, contributed 11 points to the Dow's loss; Johnson & Johnson (JNJ), down 41.14 to $87.08, trimmed the Dow by 7.3 points.

Retailers are already bracing for a tough holiday season. ShopperTrak, the Chicago market-research firm, projects holiday sales to rise 2.4% over 2013, the smallest gain since 2009.

After reporting that U.S. same-stores sales fell 0.3% in the fiscal-second quarter, Wal-Mart cut its annual earnings forecast to $5.10 to $5.30 a share from $5.20 to $5.40.

The company expects fiscal-third quarter sales in the U.S. to be "relatively flat," compared with a 1.5% gain a year earlier.

The price decline for Wal-Mart shares looks to have affected other retail shares. Target (TGT) was off 65 cents to $63.26. Costco Wholesale (COST) dropped 93 cents to $115.41. Abercrombie & Fitch (ANF) fell 55 cents to $37.05. Macy's (M) fell 78 cents to $42.80.

The sector also was affected by the ongoing woes at J.C. Penney (JCP). Its shares were down $1.78 to $10.12 after hitting a low of $9.93. Not only was that low price a 52-week low, but the shares are trading at their lowest levels since November 2000.

The market has been weighed down by increasing worries about a possible government shutdown next week, uncertainty over the Federal Reserve's plans to trim its bond-buying program and global economic and political uncertainty.

The Dow is looking at a 1.15% loss for the week after three weeks of gains, with the S&P 500 off 1% and the Nasdaq down 0.4%. The 10-year Treasury yield fell to 2.614% from 2.653% on Tuesday and as high as 2.979% on Sept. 5.

Crude oil  (-CL) in New York fell to $102.66 a barrel and is off 4.6% this month. Gold (-GC), however, jumped $19.90 to $1336.20 an ounce in New York. Despite the 1.5% gain, the metal is down 4.3% for the month -- and 20.3% on the year.

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137Comments
Sep 25, 2013 4:50PM
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As I read the comments, I think about the hay-day of Wal-mart.  Most of the U.S. population didn't give a S**t about wages of the workers or where the products came from. All they wanted was CHEAP prices.  Why are Americans starting to care about these things now.  We the customers created these practices in exchange for cheap goods and now we are paying the price with loss of income, jobs and a lower lifestyle.  We gave our money and jobs to China and other countries. If you also consider the oil we have purchased from the Middle East its the largest transfer of wealth in the history of the world. We have improved there countries at the expense of ours. The sad part it is still going on today as you read this!!  Our infrastructure is in ruin, the States are broke, we can't take care of our elderly and Veterans' are getting the shaft, but we give billions away to countries who want to destroy us.  We have bigger problems than Wal-mart.  WAKE UP AMERICA , DEMAND OUR LEGISLATORS AND PRESIDENT TAKE CARE OF AMERICA BEFORE ITS GONE. 
Sep 25, 2013 4:23PM
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Unfortunately, Wal-Mart did to our town what they have done to so many small towns across our country.  They came in years ago and have since put every mom and pop small business out of business.  Therefore, not only are you forced to buy there, the quality of their goods is pathetic to put it mildly.  Remember when they were pushing "American Made"?  That's about the time they were focused on killing the local small town economy.  I do whatever I can to not buy from them but you can only get so much off the internet when you live in small town America.
Sep 25, 2013 4:09PM
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Yeah, or maybe because most of their inventory is now made in CHINA?! Inferior, sometimes dangerous CHINESE goods aren't such a great deal anymore, people are realizing. Don't ever buy pet food or for that matter, any chews or toys that a pet will put in their mouths made in CHINA. Processed with Arsenic, Chlorine Bleach and Formaldehyde. Great stuff for your loved ones!
Sep 25, 2013 3:53PM
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Hmmm...do you think it's because people are shopping elsewhere? They are tired of companies like them, making billions in profits, yet refusing to pay a decent wage or give benefits! I don't shop there anymore, and haven't for about 3 years! Low prices are not worth my soul!
Sep 25, 2013 4:32PM
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This has nothing to do with Wal-Mart, and everything to do with this crappy economy, and looming tax increases.  And to boot, get ready for "inflation" to come a knocking.  Hate Wal-Mart all you want, but it has nothing to do with the way this countries government spends money like a drunken sailor.  Nice to see this President having more troops in Afghanistan than when he won his job nearly 5 years ago.  I voted to end these disasters in the middle east.  He's just another lying politician owned by the war machine, he's W light, nothing more.  He is an amateur leader and we are all going to pay the price for his incompetence, and that right soon.  You can't continue to spend money we don't have. 
Sep 25, 2013 4:39PM
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The problem is the overall economy. The economy has never recovered from the jobs lost in 2008. The Fed in their infinite stupidity has not helped, accept to support the banks. The housing market is a joke, because, all the big money funds have been buying up homes to support the real estate market. Obama Care requirements are also going  take more money out of the middle class  pockets further driving the economy to the brink. The true unemployment rate is about 15% still. If you look at jobs lost in 2008 and new jobs created since 2008 it is a negative. China is not the real problem, it is the gap between the old way of doing business and the new way of doing business. Most of the new manufacturing  jobs are  almost 100% automated. The American Auto Industry could probably eliminate 50% of current jobs if totally automated. And the skill level for these new jobs is very steep!  These problems are not easily solved, because both political parties and not interest in the average person.
Sep 25, 2013 5:18PM
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Could be customers are not spending big because they have Less money to spend,

And all prices are increasing due to the FED printing funny money...

Welcome to oblamos America...home of part time jobs....

Sep 25, 2013 4:28PM
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Haven't shopped there in several years...they argue with my wife over her coupons(and no she is not an extreme couponer) the tellers are more interested in when their next break is and not interested in getting us checked out,never any of the "sale" item on the shelves even on the day the sale starts,customer service is a joke and their prices really aren't any lower than out local grocery stores are
Sep 25, 2013 3:51PM
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Well, I would expect suppliers to raise their costs based on reduced volumes.  And if Walmart refuses, then find another retailer who wants a great deal like Walmart once had. 
Sep 25, 2013 4:01PM
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Poor Walmart.....I would not shop there even if it was the last store standing!!!! 
Sep 25, 2013 4:39PM
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Ya damn right...I am closing my wallet until things start to return to an even keel...otherwise, investors can just go diving outta buildings for all I care...and October is right around the corner...lol 

Sep 25, 2013 4:43PM
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My local Wal-Marts look like third-world post-apocalypse stores now.  Shelves are bare, items are out of stock for weeks.  It's not worth it to me to shop there if I have to turn around and go to another retailer to finish my errands - if they're cutting back even more on stocking, they won't have to worry about me crowding their aisles... 
Sep 25, 2013 4:56PM
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I cannot wait for the post mortum honest reporting of the failed Presidency of Barack Hussien Obama. I do believe that these 8 yeasr will be the worst economic times in our history when taken in its totality. I do believe that it will pale in comparison to the Great Depression. The only difference is the false illusion of a booming stock market which has been propped up with digitized, invisible Monopoly funny money. If the same economy were had under a white Republican, it would already be called what it is. Too bad we have to protect our first Affirmative Action Presdient at the expense of the truth.
Sep 25, 2013 4:40PM
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I would be happy to see Wal-Mart fail.

 

Sep 25, 2013 4:35PM
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I stopped shopping there six months ago due to iffy availabity of items and an attitude of of don't bother us by the associates.  I will not shop there again. 
Sep 25, 2013 4:13PM
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Is it the economy or Walmart?  I hope its the latter. 

Sep 25, 2013 4:47PM
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I try to always shop ar stores that treat their employees well.
Sep 25, 2013 5:09PM
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the chinese must be shaking in their boots at this news...
Sep 25, 2013 5:09PM
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You do not want Wal-Mart to fail. No matter how ruthless there policies are, because of the cause and effect on the overall economy which would make the outlook for recovery  bleaker than it already is. If all the body politic does not change, by 2015 we (the world economies) will be a the point of no return. The problem was solvable in the past just go out and start a World War or Vietnam War, but times have changed. The next problem is there a no dynamics leaders  in the world, the current leaders use the bully pulpit to support their own agendas, rather than what is best for the overall society. And a lot of people say tax the rich more. Each government US, Euro and China are printing around 85 billion dollars month and cannot get the world economies  going, taxing the wealthiest is a drop in the bucket.

 

Sep 25, 2013 4:58PM
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Two things to fear when we finally get the Wal-Mart problem closed... first, that massive over-stock of cheap crap will thwart our attempts to re-establish manufacturing and local small business. We need to ship it back to China before it does. Second... what do we do with those ridiculous massive big box locations? I wonder if we can dismantle them and at least reconstitute some of the blocks and steel. 
Somebody mentioned Amazon-- we can probably collapse them completely by ordering packages of 12-roll toilet paper (shipped free). The cost shipped is less than Costco in-store. We all know it's a terror plot to destroy regular retail and competition. Amazon zombies don't pay sales tax either. A concerted effort to hunt them down and make them cough it up retroactive should cover some of the outrageous QE Bernanke killed us with. 
IF WE WORK TOGETHER WE CAN JAM WHAT SUPPRESSED US DOWN THE THROATS OF THE TERRORISTS WHO HURT US. A reminder that the Walton inheritors have more in assets than 130,000,000 Americans. THAT ISN'T RIGHT... IT'S TERRORISM. 
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