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AntZ
02-23-2011, 11:19 AM
Wal-Mart says needs more time to fix U.S. missteps

On Tuesday February 22, 2011, 4:50 pm EST

By Jessica Wohl




CHICAGO (Reuters) - Wal-Mart Stores Inc (NYSE:WMT - News) failed to meet its promise of reigniting sales at its U.S. stores, a disappointment for a new leadership team charged with turning things around in the face of pressure from even cheaper discounters.

The retailer reported its seventh consecutive quarterly decline in sales at U.S. stores open at least a year, posting a 1.8 percent drop that was much bigger than its worst forecast and showing how hard it is for a merchant that accounts for 10 percent of U.S. retail sales to overcome its own mistakes.

Wal-Mart shares closed down 3.1 percent, despite the company's reporting earnings that beat analysts' expectations. U.S. sales are also still being hurt by a poorly executed decision, since reversed, to pare down the number of items Wal-Mart offers.

Bill Simon became president and CEO of the Walmart U.S. business in late June and named a new merchandising chief last month, moves that could take months to bear fruit as Wal-Mart returns to its roots of controlling costs while offering a wider variety of goods.

"What was spoken about on the call today was nothing short of reversal of much of the actions taken under the prior administration," said Gilford Securities analyst Bernard Sosnick. "Simon is boldly going back to basics."

Meanwhile, stores such as Family Dollar Stores Inc (NYSE:FDO - News) and Dollar General Corp (NYSE:DG - News) have gained appeal with shoppers on tight budgets by offering lower price points -- albeit for smaller quantities -- on goods such as detergent, especially as those shoppers run out of money at the end of the month.

Wal-Mart is tweaking its prices and product assortment, and it "will take time to see results," said CEO Mike Duke.

"What they are doing to everybody else, the dollar stores are doing to them," said Britt Beemer, president of America's Research Group. According to his research, 33 percent of U.S. consumers shop at dollar stores and 40 percent of Wal-Mart shoppers shop at dollar stores.

Dollar stores, so named because they traditionally sold all their goods for a dollar or less, are rapidly opening more locations and already have a stronger presence in urban areas that Wal-Mart is trying to enter. Shoppers must often drive further to Wal-Mart, an issue that is more pressing as gas prices rise.

"We are seeing the worst consumer reaction to gas inflation since 2006," said Richard Hastings, consumer strategist at Global Hunter Securities, whose firm found that Wal-Mart shoppers were more likely than those surveyed at 11 other chains to cut back on driving due to higher gas prices.

Wal-Mart shares fell below $43 in 2006. The stock closed on Tuesday at $53.67 on the New York Stock Exchange, just above where it traded 10 years ago.

Wal-Mart is selling more lower-priced goods to appeal to such patrons, Chief Financial Officer Charles Holley said. It also plans to open its first "Walmart Express" in the second quarter and 30 to 40 total small and medium stores this year.

Shoppers still did their big shopping trips at Wal-Mart, but it lost out on so-called "fill in" trips when shoppers buy items such as bread, milk or detergent that they need quickly.

Wal-Mart's shoppers are feeling the pinch as unemployment remains at high levels. In the fourth quarter, the use of government assistance programs to pay for goods was up half of one percentage point from a year earlier, Simon said.

Wal-Mart expects sales at its U.S. discount chain to improve as the year progresses. For the current quarter, it expects same-store sales to be down 2 percent to flat.

Those results and expectations are in sharp contrast to company optimism in the fall, when Wal-Mart said fourth-quarter same-store sales at its namesake U.S. stores should rise, even though its official forecast suggested a decline of 1 percent to a rise of 2 percent.

"At the analyst day in October, Mike Duke made it very clear they were going to do a positive comp this quarter in Walmart U.S. and clearly (they) did not do that, so that was a disappointment," said Telsey Advisory Group analyst Joseph Feldman.

SALES LIGHT, EARNINGS TOP EXPECTATIONS

While Wal-Mart has expanded into more than a dozen countries and is ripe for further international growth, the U.S. stores still represent the lion's share of its business.

More than 62 percent of its $418.95 billion in fiscal 2011 sales came from the U.S. discount stores.

Wal-Mart is by far the biggest U.S. retailer, with more than 10 percent of total U.S. retail sales, though it is not growing as quickly as the overall market.

Wal-Mart plans to only pass along price increases when they cannot be avoided. It is working with suppliers to reduce inflationary pressure on everything from food to clothing.

Wal-Mart earned $5.02 billion, or $1.41 per share, in the fourth quarter ended on January 31, up from $4.82 billion, or $1.26 per share, a year earlier.

Excluding one-time items, earnings were $1.34 a share, compared with the analysts' average estimate of $1.31, according to Thomson Reuters I/B/E/S.

Sales rose 2.5 percent to $115.6 billion, short of analysts' expectations of $117.7 billion.

Wal-Mart forecast per share earnings of 91 to 96 cents for the first quarter and $4.35 to $4.50 for the fiscal year. It also reduced its fiscal 2012 U.S. capital expenditure budget by $1 billion, for a total of $6.5 billion to $7 billion.

Hal-9000
02-23-2011, 04:02 PM
awwww....Walmart killed so many independent stores and now another has come along to do the same thing to them???


welcome to hal-mart bitchez!!!