Wal-Mart foresees sluggish holiday

NEW YORK — Wal-Mart's holiday sales used to be the retail industry's gold standard.

Through a mixture of bad judgment and economic woes like a crumbling housing market and higher gas prices, Wal-Mart tripped this year. And its fall is sending shock waves throughout the industry as it heads into the last few weeks of holiday shopping.

Wal-Mart on Thursday reported a sales decline for the first time in 10 years and warned that its holiday sales would be disappointing. At the same time, the government had worrisome news on jobs, saying unemployment-benefit gains jumped to the highest level since October 2005.

Many retailers probably didn't want to hear the messages from Wal-Mart and the Labor Department because they may spell trouble for them, too.

Industry analysts generally think the world's largest retailer is struggling with its own internal problems, not an industrywide malaise. But bad news for Wal-Mart, which promised more aggressive discounting on holiday merchandise, means intensified price wars, and lower profit margins, as other merchants slash their prices to compete.

"This is pretty discouraging," said Ken Perkins, president of RetailMetrics, a research company in Swampscott, Mass.

Wal-Mart's confirmation of weak November sales and its announcement that its December same-store sales gain would be no better than 1 percent came as the nation's retailers reported an overall mixed performance for the month. Same-store sales reflect business at stores open at least a year and are a widely followed measure of a company's strength.

In contrast with Target

Wal-Mart's disappointment was a sharp contrast with results from discount rival Target and Macy's operator Federated Department Stores, which reported a robust 8.5 percent same-store sales gain, beating the 4.8 percent estimate. Other retailers had mixed sales; J.C. Penney and Costco Wholesale both fell short of Wall Street projections.

Costco reported a 5 percent gain in same-store sales, below the 5.7 percent estimate. The retailer, which sells gasoline, was hurt by declining prices at the pump.

Nordstrom had a 5.4 percent gain in same-store sales, matching Wall Street expectations.

Penney said same-store sales at its department stores rose 1.4 percent, falling short of the 3.7 percent forecast from Wall Street.

Still struggling

Gap, which is still struggling to find the right fashion formula, suffered an 8 percent drop in same-store sales, worse than the 5.4 percent forecast.

Limited Brands had a 12 percent increase in same-store sales, exceeding the 7.8 percent estimate.

Teen retailers generally did well. Everett-based Zumiez reported Wednesday that same-store sales increased 12.1 percent in November for the four-week period from year-ago levels. Wet Seal had a 5.5 percent same-store gain. American Eagle Outfitters sales rose 14 percent.

The timing of Wal-Mart's news couldn't have been worse, coming just after the start of holiday shopping. While many retailers had a strong Thanksgiving weekend, Wal-Mart said Saturday its November sales would be weaker than expected.

Wal-Mart's 0.1 percent dip in same-store sales for the month is in line with the reduced forecast from analysts surveyed by Thomson Financial. Including a drop in gasoline revenues from its Sam's Club division, which Wal-Mart did not include in its calculation, same store-sales fell 0.3 percent.

Wal-Mart has struggled in recent months with a mix of problems, including the fact that its lower-income customers were hurt by soaring gas prices.

But the company's lackluster sales have persisted even as the cost of gas eased — partly because its attempt to broaden its appeal to higher-income shoppers was poorly executed. It filled its fall clothing racks with too many trendy items like skinny jeans that shoppers didn't want.

Wal-Mart's weakness dragged down the International Council of Shopping Centers-UBS same-store sales tally for November to 2.1 percent, below the original 3 percent growth forecast. Excluding Wal-Mart, the tally rose 4 percent.