Accordingly, today's tepid news on their sales isn't an especially good omen for U.S. economic activity getting stronger anytime soon. And by the way, Target's results, while better than Wal-Mart's, weren't all that great either.
While sales were not awful at either retailer, muddling through is perhaps the best way to paint the picture. {NOTE: Compared to Europe, however, muddling through is not all bad. See Euro-Zone Economy Contracts in Third Quarter.}
But enough about Europe for now. We'll start domestically with Wal-Mart.
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Wal-Mart Sales Shy of Hopes says this:
"Wal-Mart Stores fiscal third-quarter earnings rose 9% as the world's largest retailer continued to draw customers looking for bargains.
The company called the third quarter a success, even though revenue missed analysts' expectations. . . .
The company said it is prepared for a robust holiday quarter. The period will be "competitive," with prices being "a major factor," Chief Executive Mike Duke said on a conference call. Wal-Mart's fundamentals "are strong and we are well positioned for the fourth quarter," Mr. Duke said.
In preparation for the season, Wal-Mart has taken steps like starting its layaway program earlier and opening at 8 p.m. EST on Thanksgiving night. . . .
Mr. Holley said the retailer will add about $20 billion of sales this year, with a piece of that coming during the holiday fourth quarter.
Wal-Mart raised the low-end of its full-year earnings from continuing operations estimate by five cents, now expecting $4.88 to $4.93 a share. It also forecast current-quarter earnings from continuing operations of $1.53 to $1.58 a share, while analysts surveyed by Thomson Reuters expect $1.59 a share.
Results at Wal-Mart have been challenged of late as its core lower-income customers in the U.S. contend with high gasoline prices and persistently high unemployment levels. But strong expense-control efforts have helped its margins. . . .
Excluding fuel, same-store sales rose 1.5% at Wal-Mart stores in the U.S., compared with its August projection of a 1% to 3% increase. Same-store sales at Sam's Club climbed 2.7%, excluding fuel, compared with the company's 3% to 5% growth prediction.
For the current quarter, the company expects U.S. same-store sales to rise 1% to 3% at Wal-Mart and to increase 1.5% to 3.5% at Sam's Club. Wal-Mart's wholesale club is starting to see the kind of trading down that has occurred at Wal-Mart stores. In Sam's Club case, it may be customers trading down to chicken from beef, Mr. Holley said."
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Target's Earnings Increase 15% tells a slightly better story:
"Target Corp.'s earnings rose 15% for its fiscal third quarter, partly because of a gain on an asset sale, as the big-box retailer's revenue increased.
Target, the nation's second-largest retailer by sales, behind Wal-Mart Stores Inc., has been searching for ways to boost sales as many of its core lower-income shoppers remain cautious in the sluggish economy. The company has added fresh food to many stores, held a "Christmas in July" promotion to expand the spending season outside the November and December deluge and recently said it would open at 9 p.m. on Thanksgiving night. . . .
Revenue increased 3.2% to $16.93 billion.
Summing Up
When Wal-Mart and Target struggle to reach low single digit sales increases, times are tough.
For those individuals with discretionary spending power this holiday season, there are going to be lots of strong promotions out there as retailers are positioned to compete aggressively for the limited consumer dollars available.
And it's all going to begin Thanksgiving evening. Maybe sometime soon "Black Friday" will become "Black Thursday."
Thanks. Bob.
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