Wal-Mart has itself to blame for current woes

Vulnerable side to retailing behemoth being exposed this holiday season

	Wal-mart Stores Inc., the world's largest retailer, said U.S. same-store sales fell 0.1 percent in November, the worst performance in more than 10 years.
Rob Carr / AP file

updated 3:34 p.m. ET Dec. 2, 2006

NEW YORK - Remember when Wal-Mart was talked about as the retailer where America shopped? At least in recent months, it looks like consumers increasingly have taken their money elsewhere.

Wal-Mart Stores Inc. should be a dominant force during the all-important holiday season, but instead it has tallied terrible results. Its same-store sales fell for the first time in a decade in November and it is forecasting anemic growth this month as well.

Blame for such missteps can’t go just to the slowing U.S. economy. Wal-Mart’s reputation as a difficult employer and the growing perception that it doesn’t always offer the lowest prices have led consumers to shop at competitors of the world’s largest retailer.

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Given Wal-Mart’s size and power, what it does matters. With more than 6,600 stores worldwide and sales for 2006 estimated to average out to just under $1 billion a day, the Bentonville, Ark., discount chain has long been considered an industry and economic bellwether.

But its recent woes show a vulnerable side to this retailing behemoth. Maybe Wal-Mart’s problems are just Wal-Mart’s problems.

Its November same-store sales dipped 0.1 percent, marking the third consecutive month of disappointing results. Those weak sales came despite Wal-Mart’s price cuts on toys, electronics and other items in an attempt to draw shoppers.

Flat sales expected
For the heart of the holiday season, Wal-Mart is expecting December same-store sales to be flat to no more than 1 percent higher than a year earlier. The company blamed weak sales of apparel and a slump in its home furnishings business.

The initial take on Wall Street earlier in the week — when Wal-Mart tipped its hand that November wasn’t looking good — was that the weakness was symptomatic of a slowdown in overall economic growth. The stock market sold off on the idea that the housing market correction coupled with an uncertain jobs outlook might be spurring consumers to hold off on some spending.

But for that argument to hold up, there should be other warning signs as well — and there aren’t. Consumer spending has picked up in recent months as gas prices have dropped, and new retail sales show strong results from other merchants.

Rival discount chain Target Corp. tallied better-than-expected same-store sales of 5.9 percent in November. Shoppers scooped up its trendy offerings even though they bypassed them at Wal-Mart. The department store chains also fared well, including the 8.9 percent gain at Federated Department Stores Inc., which also boosted its December sales forecast.