Wal-Mart Watch Statement and Background on July Wal-Mart Sales Figures

For Immediate Release
Thursday, August 09, 2007

Wal-Mart Watch executive director David Nassar today released the following statement in response to Wal-Mart’s July sales numbers, highlighting how the company’s problems go beyond slow sales:

“Wal-Mart not only touts its low prices, it now touts low expectations. Today, Wal-Mart reported a meager 1.9% growth in same store sales for July. However, Wal-Mart set its expectations for Wall Street so low (between 1 and 2%), that 1.9% is viewed as an achievement for the company, even as companies such as Target and Costco report same-stores sales growth of 6.1% and 6.0% respectively. In addition, Wal-Mart trailed the retail industry as a whole, which showed 2.9% comparable sales growth.

“While Wal-Mart may have achieved its low goal, these minimal sales gains are part of a pattern, along with flat stock prices and scaled back expansion plans, that show Wal-Mart faces serious challenges to its growth. Are these lower expectations an admission that Wal-Mart recognizes it is no longer able to grow at a desirable pace?”

BACKGROUND ON WAL-MART’S JULY SALES NUMBERS

  • Wal-Mart is having problems growing in the places it wants and needs to grow: new markets. As our polling showed months ago, its poor business practices are impacting its image and it is not able to expand into the critcal urban and international growth markets.
  • The company is having an identity crisis. Does it want to be trendy and hip, pushing new apparel designs and more upscale home décor designs, or does it want to offer the lowest prices? It pushed out its marketing head and apparel chief, then followed up with a major price-slashing back-to-school campaign - synonymous with its original slogan of always low prices.
  • It’s possible that people are starting to lose trust in Wal-Mart. With the recent focus on the number of unsafe and recalled foods and toys from China, and more consumers realizing that Wal-Mart imports massive amount of goods and services from China, they may shy away from Wal-Mart. A recent poll conducted by Consumer Reports showed that 92% of respondents want to know where their food comes from - yet Wal-Mart lobbies against COOL, increased food safety regulations and port inspections. Another poll, conducted by Zogby International, showed that 82% of respondents are wary of buying goods from China.
  • Sam’s Club’s growth is making Wal-Mart’s figures look better than they actually are. The real situation: the company’s mainline stores are still stagnating around 1% same-store sales growth. Saturation is still having an effect in this area.
  • Wal-Mart’s primary competitors are still out pacing it. Costco grew 6% compared to Sam’s Club 5.4%, and Target grew 6.1% compared to Wal-Mart’s mainline stores 1.3%. Nothing has changed with regards to its regular stores, which have stagnated around 1% sales growth for a year. In January 2007, BusinessWeek reported a calculation by Communications Consulting Worldwide (CCW) that if “Wal-Mart had a reputation like that of Target Corp., its stock would be worth 8.4% more, adding $16 billion in market capitalization.”
  • Groceries, a retail category comprised of low-margin products, make up most of Wal-Mart’s sales growth. People are not “crossing the aisle” for the high-margin items such as apparel, which may mean “Everyday Low Prices” may have high cache for a can of soup, but matters very little for those who can seek higher quality high-margin items beyond Wal-Mart.