Wal-Mart had weak sales in December
Wal-Mart Stores, which mounted an unprecedented holiday marketing campaign featuring $400 laptops and celebrity-laden television commercials, is on track to post its weakest December sales growth in five years.
The discount giant estimated that sales at stores open for at least a year rose 2.2 percent. The results barely landed within the company's forecast of a 2 percent to 4 percent sales increase for the month, and indicated that Wal-Mart had its worst December since 2000, when sales rose 0.3 percent.
Wal-Mart cautioned that strong gift card sales -- which are not counted in the monthly sales figure -- would shift a number of purchases into January, which might explain some of the lackluster performance in December. For accounting purposes, gift card revenues are not recognized until the card is used.
"It's good; it's not great," Marshal Cohen, chief analyst at the market research firm NPD Group, said of the results. He predicted that Wal-Mart's decision to sell more expensive merchandise this season, like $1,000 plasma televisions and $100 cashmere scarfs, would result in higher profit margins than last year, even if sales looked disappointing.
Analysts had expected a big season from the chain -- and, by all accounts, Wal-Mart had seemed to lay the groundwork for one.
After a rare stumble during the holiday season in 2004, when Wal-Mart ratcheted back discounts to increase profit and drove away shoppers, it pledged to dominate the discount wars this time around.
It introduced a slick television, newspaper and online advertising campaign on Nov. 1, two weeks earlier than last year. The company sharply cut prices, offering a hand-held "Sports Madden 95" TV video game, from Electronic Arts, for $15, compared with $18.79 at Target. And in an unusual move, it vowed to match its competitors' early-morning prices on the day after Thanksgiving, one of the biggest shopping days.
But if Wal-Mart's December sales forecast remains unchanged, it will be worse than the chain's performance in 2004, when sales rose 3 percent. Before the release of the forecast, Bill Dreher, an analyst at Deutsche Bank Securities, said Wal-Mart's estimate of a 2 percent to 4 percent gain was not all that impressive to begin with.
Wal-Mart, which did not return telephone calls seeking comment on the sales, sought to put a cheery spin on the forecast in its prerecorded weekly sales phone message over the weekend. The message is typically straightforward, but this one included a song, based on the Christmas classic "Up on the Housetop," summarizing the holiday season.
The chorus included these lines: "Ho, ho, ho, who wouldn't go? Out to Wal-Mart, let's go shop. Get great deals, watch prices drop." But the closing lyrics offered a hint of the mood at the company, whose stock price has remained stagnant for the past year: "Just buy our stock, don't sell, sell, sell."