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Fears over recovery as walmart sales stall { November 28 2004 } Original Source Link: (May no longer be active)
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Fears over recovery as Wal-Mart sales stall
By James Politi in New York and Chris Giles in London
Published: November 28 2004 19:25 | Last updated: November 28 2004 19:25
Worries about the sustainability of the US economic recovery were stoked on Sunday after Wal-Mart, the discount retailer that is a bellwether for the country's retail sector, announced that sales grew by only 0.7 per cent in the year to November.
The world's largest retailer had estimated growth of 2 to 4 per cent just 10 days ago. But Wal-Mart revised its estimates down on Saturday evening after disappointing sales on “Black Friday”, the day after Thanksgiving so called because it is traditionally the time retailers move into profit for the year. It is an indicator of spending for the holiday season, when a quarter of annual retail sales are rung up.
Wal-Mart said sales had fallen “below plan” in the last week of November and sales growth was down on the 2.8 per cent annual rate it had reported for October.
The weakness suffered by Wal-Mart, if repeated elsewhere, would add to concerns about the durability of the US economic upturn. Widespread reluctance by consumers to maintain their free and easy spending habits would slow the economy sharply.
In recent years, and in the recession of 2001, US consumers defied predictions that their appetite for new goods would diminish. A slowdown of consumer spending would add to recent international dollar-related concerns about the prospects for exports to the US.
Although Wal-Mart reported strong sales of digital cameras, television/DVD sets, learning toys and video games, it said “customer traffic declined towards the end of the week”.
Bill Beemer, head of America's Research Group, which surveyed 1,000 shoppers every night over the long weekend, said one reason for the slow sales at Wal-Mart could be that it had not discounted as heavily as other retailers.
“This year they did not get nearly as aggressive on the early-bird specials, and it cost them,” he said, adding that rivals such as JC Penney, Best Buy, Sears and Circuit City had discounted more deeply. But Mr Beemer's survey found that shopping levels overall on Friday were flat or down as much as 5 per cent.
However, other snapshot surveys painted a more optimistic picture. Shoppertrak showed sales on Friday grew 10.8 per cent from a year ago to $8bn. Visa USA said spending on its cards had risen 15.5 per cent to $4.1bn, although experts warned that this number may be more a reflection of the increased use of its credit cards.
Wal-Mart's lacklustre sales were partly ascribed to higher energy prices, in particular that of heating gas, which had cut customers' disposable income.
Scott Krugman, of the National Retail Federation, said discounters were especially vulnerable to the higher gas prices. But the federation is predicting a strong holiday shopping season in the US, with sales up 4.5 per cent to about $220bn over the whole period.
Few would write off the US consumer yet. Even in the recession year of 2001, real consumption expenditures grew by 2.5 per cent and consumer expenditure has exceeded economic growth every year since.
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