EarningsCenter

Walmart Can't Entirely Blame the Economy for Bad Sales

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UNITED STATES - MARCH 02:  An empty shopping cart sits in an empty aisle at a Wal-Mart SuperCenter store in Grove City, Ohio Thursday, March 2, 2006. Shoppers curbed spending at U.S. retailers in February as a blast of winter weather hurt demand for spring apparel. Stores had their smallest sales gain in nine months.  (Photo by Jay Laprete/Bloomberg via Getty Images)
Jay Laprete/Bloomberg via Getty Images

When Walmart (WMT) reported disappointing first-quarter sales figures in May, it blamed poor weather and tax refund delays. And it set low expectations for the quarter to come: Same-store sales, it predicted, would grow anywhere between 0 percent and 2 percent over last year.

As it turns out, even those low expectations were too optimistic. This morning the company reported that same-store sales for the second quarter had actually declined by 0.3 percent over last year. Traffic in its U.S. stores was likewise down. While it hit its earnings estimates, those sales figures sliced $1.99 off the share price today.

In the earnings conference call, Walmart executives continually strove to place the sales figures in context, repeatedly referring to the retail environment as "challenging" and "disappointing" and suggesting that the "current economic environment" would keep sales flat in the quarter to come.

So is Walmart just a victim of economic hardships and spendthrift consumers, or has the world's biggest retailer lost its mojo?

"I think this does speak to the consumers," says Brian Sozzi of Belus Capital Advisors. "They're pulling in $30,000 to $40,000, and not making it to the end of their paycheck."

Indeed, Walmart executives cited "softer discretionary spending," pressured consumer spending in international markets and the impact of high gas prices in explaining poor sales figures. And it's true that median household income keeps falling (though to be fair, Walmart isn't exactly helping there).

But it's not entirely a victim of economic circumstance: It's also dealing with stiff competition.
"There's a portion here that's [due to] more competition," says Sozzi. "They've got grocery stores and dollar stores surrounding Walmart stores, and Family Dollar is putting lots of money in putting coolers in its stores." And cash-strapped consumers may be more likely to hit Family Dollar (FDO) for a few items than go to a Walmart superstore and fill a cart.

So it's true that Walmart is dealing with consumers who just don't have as much money in their pockets -- but as a discount retailer, those consumers should be its bread and butter. Rather than wait around for the economy to get better and consumer spending to recover, it might want to find a way to reclaim what ought to be its target audience.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.

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106 Comments

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megreen385

This page run by Walmart,refuse to post my comment???????

August 19 2013 at 4:51 AM Report abuse rate up rate down Reply
megreen385

LMAO Maybe Wal-Mart needs to live by Henry Fords answer,when ask why he payed his enployees so much $5 a day.His answer ,Why should I make something my enployees can't afford.54% of Wal -Mart enployees are eligible for some kind public assitance,food stamps,housing an so forth.

August 19 2013 at 4:43 AM Report abuse rate up rate down Reply
quickbobo1

I spent 30 min's today waiting to get a WM employee help me cut some felt for a project @ home, got tired of waiting, cut it myself, went to the check out, was told I needed a ticket,. the manager went and told an employee to help me at the fabric counter, waited another 10 min's for the employee to show up, got discusted, anjd walked out.. screw them, waste someone elses time, NEVER AGAIN will I shop @ wallfart. **** salaries, **** customer service E. Syracuse NY

August 18 2013 at 7:30 PM Report abuse rate up rate down Reply
2 replies to quickbobo1's comment
megreen385

Sorry to say your nothing to Walmart

August 19 2013 at 4:48 AM Report abuse rate up rate down Reply
betty_brock

That is business as usual EVERYWHERE.

August 19 2013 at 9:13 PM Report abuse rate up rate down Reply
Kymberly

I agree with an ealier comment. I rather spend just a few dollars more at my local grocery store than to stand 30 minutes or longer just to check out at Walmart. That does not include the extra driving time nor the time navigating the gigantic store. I, too, often find the shelves poorly stocked, the store is filthy and forget finding anyone that can answer a question or help you.

August 16 2013 at 4:58 PM Report abuse -1 rate up rate down Reply
Brek Randolph

Walmart has changed. One of my pet peeves is a refusal of retailers to hire enough cashiers. In the old days Walmart was different, they hired enough cashiers. One could continue down the row of cashiers until you ran into a cute girl asking if you were ready to check out. Welcome to the new Walmart just like Home depot and the rest 20 cash registers and 3 manned. It sends a message to their customers we don't care about you. Walmart is now like other retailers, stand in line and wait. No I am not going to stand in line and wait, I have the internet and other options.

August 16 2013 at 2:02 PM Report abuse rate up rate down Reply
rj2860

I think a big part of it is that people are just tired of Wal-Mart. Admittedly, I have not been in one of their stores for at least 3 years, maybe as many as 5 years. My last experience was a dirty store, stuff in the aisles cluttered shelves with merchandise out of place, horrible lighting in the store - it was like a gloomy day inside. I have to pass 2 Target stores to get to the closest Wal-Mart, though one is opening much closer soon, and both Targets are always clean, well stocked, no clutter...so I spend maybe a few dollars more on a $100 cart full of stuff...it's worth it.

When Wal-Mart was a "made in America" store I was an occasional to frequent shopper, not any more.

K-Mart has the same basic problems - I was in one 2 weeks ago and it felt like I was walking into a big rummage sale. Same issue with the lighting too - I am all for saving energy, but ....

August 16 2013 at 12:18 PM Report abuse +3 rate up rate down Reply
dencuddy

No one wants to shop where employees are unhappy, poorly treated and don't have healthcare.

That's how Typhoid Mary got her start.

August 16 2013 at 12:05 PM Report abuse +4 rate up rate down Reply
John

I refuse to shop at Walmart. My neighborhood is in a fight to keep a Walmart from opening here in SE Atlanta. Even if it does open I won't shop there.

August 16 2013 at 12:02 PM Report abuse rate up rate down Reply
Shane David

Perhaps WALMART might wish to consider that consumers are on a tighter (and smarter) budget - and that WALMART's deceptive sales practices have finally caught up with the consumer also being wiser. These PRICE ROLLBACKS are so BOGUS. Face it WALMART - consumers are going to spend their hard earned dollars where they can truly get the most. My shopping is now mostly at COSTCO and BJ Wholesale Clubs - whose stock values have SOARED!!

August 16 2013 at 12:02 PM Report abuse +5 rate up rate down Reply
gldes40

walmart thinks that they are bigger than their customers...big mistake that is now showing in their sales..horrible company to work for...period

August 16 2013 at 11:55 AM Report abuse +4 rate up rate down Reply