Inside This Issue - News
March 11th, 2013
NEW YORK – Walmart and Target Corp. both reported weak sales in February, suggesting that mass retailers continue to face serious economic headwinds.
Walmart officials blamed increases in payroll taxes and delays in tax refunds for the company’s disappointing sales in January and early February, according to internal e-mails obtained by Bloomberg News.
"Have you ever had one of those weeks where your best-prepared plans weren’t good enough to accomplish everything you set out to do?" Walmart senior vice president of U.S. replenishment Cameron Geiger asked in an e-mail to other executives dated February 1. "Well, we just had one of those weeks here at Walmart U.S. Where are all the customers? And where’s their money?"
Another e-mail, from vice president of finance and logistics Jerry Murray on February 12, called month-to-date sales a “total disaster,” and described the early February results as "the worst start to a month I have seen in my approximately seven years with the company."
Target has also acknowledged weaker-than-expected sales in February.
"The U.S. economy is growing at a painfully slow rate, and unemployment remains persistently high," noted Target president and chief executive officer Gregg Steinhafel in the company’s fourth quarter conference call. "While there are some encouraging signs in the housing market, volatility in consumer confidence, the payroll tax increase and rise in the price of gas all present incremental headwinds. Given these new challenges facing an already sluggish economy, we have a tempered view of the near-term sales environment."
The expiration of the payroll tax reduction had been expected to impact consumer spending, by cutting workers’ paychecks.
A survey conducted for the National Retail Federation (NRF) found that 73.3% of those polled said their spending plans are taking a hit.
"We cannot grow the nation’s economy until consumers consume," said NRF president and CEO Matthew Shay. "A smaller paycheck due to the fiscal cliff deal, higher gas prices, low consumer confidence and ongoing uncertainty about our nation’s fiscal health is negatively impacting consumers and businesses across the country. Every day we hear about building the middle class. We can only do that if we tear down barriers that prevent consumers from investing their hard-earned money back into our nation’s economy."
It was against this backdrop of disappointing sales that Walmart and Target reported their results for their just-ended fiscal years. Both retailers had some good news to report.
Walmart reported consolidated net sales of $466.1 billion for the fiscal year ended January 31, which is an increase of 5% over the prior year. Total revenue was $469.2 billion, also up 5%. Consolidated net income for the year attributable to Walmart was $17 billion, up 8.3%.
"Walmart topped off a really good year with a solid fourth quarter, and I’m proud of what we accomplished as a team," remarked Walmart president and CEO Mike Duke.
Looking ahead, Duke was upbeat about the strength of Walmart U.S. and Walmart International, and said he was excited about the company’s investments in e-commerce.
"We’re on schedule with the development of our new global platform to accelerate expansion of e-commerce operations in 10 countries," Duke said. "We’re well positioned in the four markets that offer us the greatest future revenue growth — the U.S., the U.K., Brazil and China."
Despite a weak holiday season, Target, too, posted solid results for fiscal 2012 and expressed optimism for the year ahead.
Target’s total sales for the 12 months ended February 2 were $72 billion, up 5.1% over the preceding year. Total revenues reached $73.3 billion, up 4.9%. Net earnings were about $3 billion, an increase of 2.4%.
"Outstanding discipline and execution by our team allowed us to achieve our full-year financial and strategic goals in 2012," Steinhafel said. "We believe these results position us well to deliver on significant plans in 2013, including completion of the largest store opening program in our company’s history with 124 stores in Canada and additional Target and CityTarget locations in the U.S., investing in new processes and technology that will improve our guests’ multichannel experience, and closing the sale of our credit card receivables."