BENTONVILLE, Ark. - Wal-Mart Stores here last week said its December same-store sales were at the low end of expectations and that earnings for the fourth quarter, which ends this month, would also be at the low end of its projected range.
In a pre-recorded call discussing its results, the company said comp-store sales for the five-week period ended Dec. 31 were up 2.2% over year-ago levels, including a 1.9% gain at its Wal-Mart Stores division, which includes discount stores, supercenters and Neighborhood Markets, and 3.6% at Sam's Club. The company said average basket size increased in the period as customer counts decreased.
Wal-Mart said earning for the fourth quarter would be at the low end of its previous guidance of 82 cents to 86 cents per share. Analysts had expected results to be at the high end of that range.
According to reports, the high level of food sales in the company's top-line gains during the quarter contributed to the weaker earnings outlook, as they carry lower margins than general merchandise.
Edward Weller, an analyst with ThinkEquity Partners, San Francisco, said economic pressures in the form of rising gas prices and other factors may be hitting Wal-Mart's core customers, which may have contributed to the weak customer counts.
Dollar General, Goodlettsville, Tenn., another retailer that targets lower-income consumers, said last week that its comp-store sales for December fell 2.8%, citing shopping-trip consolidation and pressures on consumers' discretionary spending from higher fuel prices.
Other discount retailers fared better in the holiday season. Target Corp., Minneapolis, said same-store sales rose 11.6% in December, and Costco Wholesale Corp., Issaquah, Wash., posted same-store sales gains of 10% in the month.
"You could make the case that the Costco customer is better off than the customer for Wal-Mart," Weller said.
He said Wal-Mart appeared to do some things well in the period, but simply "failed to get enough customers in through the door."
Wal-Mart had launched a more sophisticated ad effort this past season and started its holiday promotion earlier.
"They did a good a good job in a number of areas, but not a good job overall," Weller said.
In an interview with the Associated Press, Lee Scott, Wal-Mart's chief executive officer, described 2005 as "an extraordinary year" and said he was pleased with the company's performance in 2005. He also said total sales gains of $2.4 billion, or 6.3%, compared with the year-ago fourth quarter were a better barometer of the company's performance than comp-store sales.
BJ's Wholesale, Natick, Mass., reported comp-store sales gains of 1.4% in December. The club operator, which SN reported last month may be an acquisition target, said its food comps rose 5% in December, while general merchandise comps fell 3%.
Both Wal-Mart and Dollar General said they would begin adopting a new method for calculating comp-store sales in the next fiscal year in which they count stores that have been open for 13 months, rather than stores that have been open for 12 months at the start of the fiscal year.