Friday, 9 January 2009

Wal-Mart Slashes Forecasts

The one bright spot in the US retail landscape has dimmed somewhat on the back of Wal-Mart's profit downgrade announced yesterday signaling that noone is immune from the retrenchment in consumer spending. From Bloomberg:

Wal-Mart’s Bleak December May Herald More Pain in ‘09

Wal-Mart Stores Inc., Macy’s Inc. and Gap Inc. slashed earnings forecasts after the worst holiday- shopping season in 40 years, and the retail landscape may not improve heading into 2009.

Wal-Mart, the world’s biggest retailer, today said fourth- quarter earnings will be at most 94 cents a share, down from a November projection of as much as $1.07. Sales at stores open at least a year rose 1.7 percent last month, missing the 2.7 percent average of analysts’ estimates compiled by Retail Metrics Inc.

To attract customers amid rising unemployment and tightening credit, some U.S. retailers cut prices in December by as much as 70 percent. That threatens to erode profit margins in the fourth quarter, the most important of the year. The discounting may continue this year as the stores try to clear inventory.

“Consumers have become so accustomed to markdowns that nobody wants to pay full retail anymore,” said Craig Johnson, president of retail-consulting firm Customer Growth Partners LLC in New Canaan, Connecticut. “There’s going to be profit pressure in the first quarter.”

U.S. December same-store sales dropped 1.7 percent, the International Council of Shopping Centers reported. The New York-based trade group said sales declined 2.2 percent in the last two months of the year, the biggest such drop since it started tracking the data in 1969.