Why holiday may be 'Wal-Mart Christmas'
Posted
Nov 06 2008, 04:48 PM
by
Anthony Mirhaydari
Rating:
Don't tell Wal-Mart about the recession: the retailer just posted sales growth of 2.2% as it captured trade-down customer traffic. CEO H. Lee Scott Jr. is downright cocky, telling a recent meeting of investors and analysts that in his mind "there is no doubt this is Wal-Mart time."
The company plans to aggressively cut toy prices over the coming weeks, turning the upcoming holiday in what Deutsche Bank analyst Dill Dreher calls "a Wal-Mart Christmas."
Meanwhile other retailers are reporting some of the worst monthly sales figures in decades. What makes Wal-Mart so special?
With consumer confidence plunging to an all-time low, credit availability drying up, and unemployment on the rise, it's no surprise that even previously buoyant retailers like Costco are hurting. Same-store sales fell 1% at the warehouse club, its worst performance since tracking started in 1997. Discount retailer Target is also struggling to make its "cheap-chic" merchandising strategy work with embattled consumers looking for hard discounts. Same-store sales fell 4.8% versus an expected decrease of 2.8%.
For now, the retailing behemoth that Sam Walton built is perfectly positioned to steal market share in this environment. A survey of 1,000 shoppers by IRI found that people are dramatically changing their buying habits to stretch each dollar. For example, roughly half of the respondents are making a conscious effort to make cleaning and personal care products last longer. Many are also foregoing professional services from haircuts to doctor visits.
This, combined with what we've already learned about increased private label purchases, less eating out, and more dependence on the paycheck cycle, points to an increasingly desperate consumer. As the holiday approaches, Wal-Mart's ability to extend purchasing power will become more and more appreciated by both shoppers and investors.
Disclosure: I don’t own or control shares in any of the companies mentioned. I can be contacted at anthony.mirhaydari@live.com
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