It cut prices on 100 toys last month, bringing many board games down to $8. Internet speculation abounds that Sunday will bring the type of blockbuster deals on electronics normally reserved for the day after Thanksgiving. Company officials have openly promised discounts on thousands of key gift, entertaining and holiday items.
But one thing is eluding Wal-Mart: sales growth.
The company posted a meager 0.5 percent increase for October in sales at its namesake and Sam's Club stores that have been open at least one year, a key measure of a company's health in retail. Sales are predicted to be essentially flat in November, which includes the day after Thanksgiving, known as "Black Friday," the traditional kickoff of the holiday season.
The poor showing comes at the start of the most important shopping season of the year. Holiday sales account for roughly 20 percent of total revenue for retailers, and rival Target Corp. and department stores yesterday reported much larger gains. Wal-Mart broke its bad news to analysts in a meeting last week.
"Wal-Mart is going through a rougher patch than we, and management, had anticipated," Oppenheimer & Co. analyst Bernard Sosnick wrote in a research note after the conference.
The company is blaming its trendy clothing line, Metro 7, as part of the reason for weak sales growth last month. The clothing, which was advertised in Vogue, was expanded too quickly to 1,500 stores across the country, Wal-Mart said. Company officials said the apparel was more suited to just 600 stores, mainly on the coasts, and that shoppers in America's heartland were reluctant to embrace trends such as skinny jeans.
"We're continuing to work longer-term to improve the balance between fashion and core essentials in our stores," Wal-Mart Chief Financial Officer Tom Schoewe said yesterday.
Instead, this holiday seems to be all about price for Wal-Mart. It set off a price war three years ago when it began chopping prices on the season's hottest toys, helping to dethrone Toys R Us, which was later bought by a group of private investors.
Wal-Mart counted that season as a success. Its toy department raked in the most profit in the company's history.
The company is aiming to recapture that glory this season. It declared "Game on" in an announcement of this year's discounts on toys. The "Dora the Explorer" Talking Kitchen was slashed to $65 from $89.84, while the Cadillac Escalade Ride-On truck is down to $249 from $279.37.
The next target seems to be technology. GottaDeal.com, which compiles and posts advance copies of retailers' weekly promotional ads, claims to have gotten a copy of Wal-Mart's ad planned for release on Sunday. It says the ad features deep discounts on televisions, DVD players and a digital camera.
"They seem to want to start the gift-buying season as soon as possible," GottaDeal.com founder Brad Olson said in an e-mail. "It looks like they are making a 7-8 week push and not putting all their hopes for a profitable quarter on Black Friday alone."
Part of Wal-Mart's woes are also attributable to gas prices, according to senior economist Frank Badillo of Retail Forward, a consulting and market research firm. A company survey showed that more than half of low-income shoppers plan to spend less than they did last year or nothing at all. Discounters and dollar stores showed weak performance last month as a result, he said.
Gas prices are "still putting a crimp on what lower-income shoppers can afford at the stores," Badillo said. Stepping in are department stores, which had been squeezed between low-price big-box stores and more expensive specialty retailers for years. Michael P. Niemira, chief economist with the International Council of Shopping Centers, a trade group, estimated that same-store sales at department stores rose 6.2 percent last month -- outpacing the 3 percent increase in retail sales overall.
Federated Department Stores Inc., which owns Macy's and Bloomingdale's, said yesterday that sales at stores open at least a year were up 7.7 percent last month. However, that figure does not include sales at stores formerly owned by May Co., including the Hecht's chain. Federated chief executive Terry J. Lundgren said sales at those stores "continued to lag."
"There's been a lot of change in the former May Company doors, so the customers are getting accustomed to it," Federated spokesman Jim Sluzewski said.
Saks Inc. reported same-store sales growth last month of 9.2 percent. At J.C. Penney Co., sales were up 8.1 percent. Nordstrom Inc. was up 10.7 percent.
"Department stores are back," said Janet Hoffman, director of North American retail for consulting firm Accenture. "That's an exciting turn from two years ago."
The sector benefited from a disappointing performance by specialty apparel stores. Niemira estimated that sales there fell by 0.2 percent last month, though individual retailers posted a mixed bag of results. Abercrombie & Fitch Co., for example, suffered a 3 percent decline in sales in stores open at least a year, while rival American Eagle Outfitters Inc. recorded an increase of 8 percent.
Indeed, Wal-Mart is learning firsthand how fickle the apparel industry can be. In the conference with analysts, chief executive H. Lee Scott Jr. hinted that the company would be scaling back its foray into fashion. Out with the skinny jeans, in with the plain white socks. Wal-Mart sold 675 million pairs of white socks in the United States over the past year, Scott said.
"When I walk the store today, the thing I believe is that what we did is that we overloaded the fashion part," he said. "That's not who we are. It's not where the money is going to be made."
