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Wal-Mart Cuts Expectations in Face of Weak August Sales

BENTONVILLE, Ark. - In response to weaker-than-expected August sales for retailers, Wal-Mart Stores, Inc. cut back its financial forecasts. The retailer said earnings for its third quarter ending in October will probably reach only the low end of its forecast for 52 cents to 54 cents per share. Wal-Mart also cut back its quarterly same-store sales forecast to a range of 2 percent to 4 percent, below its original target of 3 percent to 5 percent growth.

The company's same-store sales for units open at least a year went up only 0.5 percent, its smallest monthly gain since December 2000.

Sears, Limited Brands, and Costco also reported declining sales. By contrast, Target managed to do better than expected, reporting a 1.8 percent same-store sales hike.

Among other factors, retailers put blame for low sales on sky-high oil prices that peaked near $50 a barrel last month, a late Labor Day weekend that pushed some demand into September, and hurricanes that devastated Florida and other areas on the East Coast.

According to Richard Hastings, v.p. retail sector analyst at New York-based Bernard Sands, such a result for Wal-Mart should have come as no surprise. While he conceded that the retailer was hurt by the economy and the weather, Hastings added, "experimenting with a lean inventory, stable pricing, and fewer markdown methods -- at a time when consumer liquidity among their shopper base was declining -- was poor timing and indicates that top management, while brilliant at logistics, sourcing, and distribution, is less than perfect in certain other operating categories.

"Wal-Mart supercenters have superior grocery/supermarket goods prices, and they really do a lot of damage to conventional supermarkets in the affected areas," Hastings continued. "But in other categories, they are more vulnerable to ordinary competition. In prescription drugs especially, the health insurance company dictates price, and the retailer has very little to say about it if the customer is using insurance for prescription co-pays."
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