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Dan Denning: Gold and Gravity

Section: Daily Dispatches

Wal-Mart Sales Stoke Recovery Fears

By James Politi in New York
and Chris Giles in London
Financial Times, London
Sunday, November 28, 2004

http://news.ft.com/cms/s/40804c8c-4172-11d9-9dd8-00000e2511c8.html

Worries about the sustainability of the US economic
recovery were stoked on Sunday after the stores
group Wal-Mart, seen as a bellwether for the country's
retail sector, announced that sales had grown by only
0.7 percent in the year to November -- a much lower
rate than the 2-4 percent increase Wal-Mart had
estimated just 10 days ago.

The world's largest retailer revised its estimates down
on Saturday evening after disappointing sales on "Black
Friday," the day after Thanksgiving and traditionally one
of the biggest shopping days in the US.

The retailer reported that sales had fallen "below plan" in
the last week of November and sales growth was down
on the 2.8 percent annual rate it had reported for October.

The weakness suffered by Wal-Mart, if reflected
elsewhere, would add to concerns about the durability
of the economic upturn. Any widespread reluctance by
consumers to maintain their free and easy spending
habits would slow the economy sharply.

In recent years, and even in the recession of 2001, US
consumers defied repeated predictions that their
appetite for new goods would diminish. A widespread
slowdown of consumer spending would also add to
recent dollar-related concerns in other countries about
the prospects for exports to the US.

Although Wal-Mart reported strong sales of digital
cameras, TV/DVD combo boxes, learning toys, and
video games, it said "customer traffic declined toward
the end of the week."

Bill Breemer, head of America's Research Group, a
consumer research firm that surveyed 1,000 shoppers
every night over the long weekend said that one reason
for the slow sales at Wal-Mart could be that it did not
discount as heavily as other retailers.

"This year they did not get nearly as aggressive on the
early-bird specials, and it cost them," he said, adding
that rivals such as JC Penney, Best Buy, Sears, and
Circuit City had discounted more deeply this year.

The lacklustre sales at Wal-Mart also appeared to be
the result of higher energy prices in particular that of
heating gas.

Scott Krugman, spokesman for the National Retail
Federation, said discounters were especially
vulnerable to the higher gas prices because it hit their
customers' disposable income.

Mr Beemer's survey found that shopping levels overall
on Friday were flat or down as much as 5 percent. But
other surveys painted a more optimistic picture.

Preliminary data from research firms appeared to show
a growth in overall traffic and sales compared with last
year with the most encouraging numbers from
Shoppertrak showing sales on Friday grew 10.8 percent
from a year ago to $8 billion.

Visa USA said spending on its cards rose 15.5 percent
to $4.1 billion although experts cautioned that this
number may be more a reflection of the increased use
of credit cards.

The National Retail Federation is predicting a strong
holiday shopping season, with sales up 4.5 percent to
about $220 billion over the whole period.

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