Goodbye, Skinny Jeans; Hello, Holiday Discounts
Friday, November 3, 2006
Having tried its hand at being hip, behemoth retailer Wal-Mart Stores Inc. is reverting to a more familiar approach this holiday season: slashing prices.
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.