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Wal-Mart Shoulders Lion's Share of Burden for Holiday-Retail Success

Posted on: Friday, 4 November 2005, 15:00 CST

By Scott Carlson, Pioneer Press, St. Paul, Minn.

Nov. 4--Will a strong holiday season for Wal-Mart translate to happy returns for U.S. retailers?

That's the big question for Arkansas-based Wal-Mart, the world's largest retailer, as it and other U.S. retailers head into the all-important holiday season, typically a period that represents 25 to 40 percent of annual sales for many of them. Whether the upcoming holiday season turns out to be a hit, miss or something in between for U.S. merchants will partly rest on Wal-Mart's shoulders.

With more than 3,000 namesake stores in the U.S. and annual revenue of $285 billion, Wal-Mart accounts for about 10 percent of all U.S. retail spending, according to industry experts. And Wal-Mart's data shows that 84 percent of the U.S. population patronizes its stores.

"It (Wal-Mart) is a bellwether," said Britt Beemer, chairman of America's Research Group, a South Carolina-based consumer research firm. "They can drive things depending on the strategy they want to take." If monthly sales results are any indicator, Wal-Mart appears headed for at least a decent holiday season and possibly a strong one. On Thursday, Wal-Mart reported an overall 4.3 percent increase for October in sales at stores open at least a year and a 3.9 percent increase at its namesake discount stores.

Looking ahead, Wal-Mart is forecasting a 3 to 5 percent increase in November for so-called same-store sales, a key indicator of a retailer's financial health.

Some retail experts said another factor that could help Wal-Mart push past consumer anxiety over economic uncertainty and high home heating costs is the discounter's broader, deeper and more aggressive holiday selling campaign. Wal-Mart this week kicked off its holiday merchandising drive, the earliest in the company's history.

Wal-Mart's marketing campaign has a new, glitzier approach, with television ads featuring celebrities Garth Brooks, Destiny's Child, Martina McBride, Jesse McCartney, and Queen Latifah. Wal-Mart's promotions also are being integrated across all media channels including print, online and in-store signage.

"A more focused message could drive additional traffic to Wal-Mart stores," Citigroup analyst Deborah Weinswigsaid in a recent research report. "Once the customer is in the store, we believe that Wal-Mart's improved merchandise will drive ticket, " which is retail jargon for consumers spending more money.

Weinswig and others also expect Wal-Mart to be very aggressive on pricing for the season after posting disappointing sales last year's holiday season, stumbling out of the gate on Thanksgiving weekend. Industry experts anticipate Wal-Mart will drive consumer traffic by offering competitive prices on consumer electronics and toys, two key merchandise categories.

But whether Wal-Mart's aggressiveness will carry over to the rest of U.S. retailers to produce a rosy holiday season is questionable.

"Because Wal-Mart is such a big chunk of economy, they will reflect on overall retails," said George Rosenbaum, chief executive of Leo J. Shapiro & Associates, a Chicago-based consumer and retail consulting firm. "But there is going to be a lot of volatility and variability within the various retail categories." The early story: Industry experts generally expect luxury and upscale retailers to do well, along with some discounters (including Target Corp.) and specialty merchants. But many expect mid-tier department stores to continue to struggle.

For now, most prognosticators are predicting holiday retail sales will increase between 3 to 5 percent compared with those for the same period last year, with some predicting "ho-hum" results.

With the prime holiday selling season still three weeks away, consumer spending plans also remain a moving target. While overall consumer spending is expected to increase, some surveys are forecasting that as many as a third of Americans say they plan to spend less for the holidays.

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WMT, TGT,

Source: Saint Paul Pioneer Press (St. Paul, Minn.)

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