Wal-Mart stock drops with sales forecast

From combined dispatches

BENTONVILLE, Ark. — Wal-Mart Stores Inc.’s share price tumbled nearly 4 percent yesterday after the world’s largest retailer lowered its November sales forecast over the weekend.

Wal-Mart had said Saturday it expected its sales at stores open at least a year to be up only 0.7 percent in November, rather than its earlier projection of 2 percent to 4 percent growth.

Wal-Mart shares fell $2.17, or 3.9 percent, to close at $53.15 on the New York Stock Exchange.

Retail analyst Kurt Barnard and other analysts said Wal-Mart didn’t offer the deep discounts it did in past years as the holiday shopping season began Friday.

“I think that Wal-Mart simply decided its normal range of pricing is such that it is definitely considered low by any normal standard,” said Mr. Barnard, president of Barnard’s Retail Forecasting in Upper Montclair, N.J.

By sitting out a year of big-sale promotions, Wal-Mart may have been trying to determine whether it can keep its profits up without having to slash prices on already discounted merchandise, he said.

“They’re looking to get a better gross margin,” he said. “They undoubtedly achieved that.”

Low-income shoppers curbed spending amid high energy prices, Deutsche Bank analyst Bill Dreher said. Wal-Mart’s sales of nonfood items such as clothing may have fallen as results at rival Target Corp. increased, he said.

“We’re really starting to see Wal-Mart having a tough time and Target really accelerate,” Mr. Dreher said in a conference call.

Wal-Mart, which also owns the Sam’s Club warehouse chain, earlier in the month said it would offer “more balanced” promotions because shoppers are delaying purchases until closer to the holiday. The number of shoppers declined toward the end of last week, the retailer said.

Sales may have declined at Wal-Mart’s discount stores while rising at Sam’s Club. That would be the first decline at the discount chain in at least 10 years, Sanford C. Bernstein analyst Emme Kozloff wrote in a report.

Sales of groceries may have helped keep results positive for the month, Mr. Dreher said.

Mr. Barnard noted that Wal-Mart’s downward sales forecast did not necessarily indicate the company will make less money.

“They never even mentioned the word profit,” he said.

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