Wal-Mart Predicts Flat Holiday Sales

November 15, 2009 Updated: October 1, 2015

 (Justin Sullivan/Getty Images)
(Justin Sullivan/Getty Images)
Wal-Mart Stores Inc., the world’s largest retailer, predicted flat sales this holiday season and introduced a slew of new promotions to encourage consumers into spending early for the holidays.

Last week, the retailer announced $3.2 billion in third-quarter income, and a record 84 cents per share in profit.

“The sales environment continued to be difficult this quarter, but customer traffic is up throughout the company. We gained market share, especially in the United States, the United Kingdom and Mexico, as customers around the globe continued to count on
Wal-Mart for quality and low prices,” said chief executive officer Mike Duke in a statement.

The company has cut its inventory by 4 percent as it faced the most difficult economic environment in years—the 10.2 percent U.S. unemployment rate is the highest in 26 years. The price for groceries, on average, decreased 6 percent compared to last year, the company said.

“Customers are very price focused today,” said Vice Chairman Eduardo Castro-Wright on a conference call with analysts. And Wal-Mart’s focus on lower prices has helped the company weather the recession better than some of its competitors.

Wal-Mart expects fourth-quarter sales to be “flat, plus or minus 1 percent” compared to last year, the company said.

Holiday Promotion

Starting on Saturday Nov. 14, Wal-Mart began a one-week promotion on its BlackBerry smartphones—anyone who purchases a BlackBerry with a two-year contract on any wireless carrier this week will receive a $100 Wal-Mart gift card.

“With our expansion of Wal-Mart Wireless products over the last year, we look forward to providing an exciting offer on our BlackBerry assortment and give cellular customers an extra boost on holiday needs,” said Wal-Mart Vice President Greg Hall in a statement.

Earlier this month, the retailer announced a series of weekly price cuts on thousands of items across all departments. Wal-Mart has frequently in the past lowered prices to undercut rivals and generate sales volume. Its economy of scale allows the company to procure items at a lower cost than its smaller rivals.

Vendor Payments

Wal-Mart also announced a faster way to pay its clothing vendors, which could shift the way retailers and vendors do business.

This month, Wal-Mart told about 1,000 clothing vendors that they would get paid within 10 to 15 days, compared to the industry norm of between 60 to 90 days. The faster payments could help struggling small businesses in a cash flow crunch.

The news comes after CIT Group Inc. filed for bankruptcy. CIT serves as a business lender and its factoring business finances almost 2,000 small to medium-sized manufacturers.

Due to Wal-Mart’s size and scale, it could wield significant influence over vendors and force other retailers to do the same. The company did not disclose how much of a discount vendors must give to get paid early.