Wal-Mart has been the stalwart of the US retail industry in the last year, largely posting sales gains while others notch declines.
But earlier this month, the discount giant stumbled when it reported December same-store sales below Wall Street expectations and on Wednesday, Credit Suisse downgraded its rating on shares of the retailer to “neutral” from “outperform”.
At issue? Credit Suisse is worried that the momentum in Wal-Mart’s business has slowed.
“Sales were especially poor in discretionary items in general, at Sam’s Club, and in the International division, illustrating that even Wal-Mart is not immune to the economic slowdown. The incremental benefit it realized from consumer trade down in 2008 might not repeat itself in 2009,” Credit Suisse stated.
Analysts hav told Reuters that Wal-Mart could face stiffer competition from its rivals this year (read more).
Another issue facing the world’s biggest retailer? Waning inflation, especially in food, and slowing square footage growth could pressure sales growth and SG&A rates, Credit Suisse contends.
“Price increases, not unit growth, within the grocery and health and wellness categories drove the majority of Wal-Mart’s sales growth in 2008,” Credit Suisse stated in its research note.
But this year, food inflation is expected to decelerate.
“The combination of slowed square footage growth in recent years and waning inflation are likely to exacerbate the challenge Wal-Mart faces in controlling its SG&A expense rates, something it has struggled to do recently,” Credit Suisse stated.
Looks like Mike Duke should be prepared to hit the ground running when he takes over as Wal-Mart’s CEO on Feb 1.
(Photo: Reuters)
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Good. The worse Walmart does, the better for the American economy. If they’re experiencing financial problems and are short on liquidity, then that means less mega-superstores to steamroll local economies and send jobs to communist China. I’m doing some work with WakeupWalmart.com to accelerate this trend and encourage all of you to join me for the good fight!
- Posted by ShineickRecently I have experienced many discrepancies on Wal-Mart’s pricing such as tomatoes @ $1.29lb but charged for squash @ $2.48, windshield wiper fluid marked on shelf @ $1.08 but charged $1.78. Due to cross training requirements, one employee that I recognized from clothing section, was operating checkout register. I purchased one Sam’s Soda (2 liter) for 67 cents but was charged 9 times and received 2 credits which involved many minutes of punching keys and also using scan gun. That resulted in being charged 7 times for the same item. There have also been other incidents but have been reimbursed for all errors. So I would suggest to anyone to pay close attention to what you think you are paying for an item and what appears on your sales slip.
- Posted by Jerry