Bloomberg reports today that Wal-Mart Stores Inc. of Bentonville is cutting orders placed with suppliers for the next two quarters as inventories pile up. This, as Wal-Mart customers spend less than expected with the world’s largest retailer.
Bloomberg once again cites emails from inside the company — actually, one email — as the basis for its report. But Wal-Mart spokesman Dave Tovar tells The Associated Press said the Bloomberg report is misleading and that in some categories, the discounter was ordering more, and in other areas it was ordering less.
“This is business as usual,” Tovar said, noting that it was part of an ongoing process of managing the seasonality of the business based on consumer demand.
Brooke Buchanan, also speaking for Wal-Mart, pointed out to Arkansas Business that the Bloomberg reporter, Renee Dudley, based the premise of her report on one email from one of Wal-Mart’s buyers to one of its suppliers.
From the Bloomberg article:
Last week, an ordering manager at the company’s Bentonville, Arkansas, headquarters described the pullback in an e-mail to a supplier, who said others got similar messages. “We are looking at reducing inventory for Q3 and Q4,” said the Sept. 17 e-mail, which was reviewed by Bloomberg News.
U.S. inventory growth at Wal-Mart outstripped sales gains in the second quarter at a faster rate than at the retailer’s biggest rivals. Merchandise has been piling up because consumers have been spending less freely than Wal-Mart projected, and the company has forfeited some sales because it doesn’t have enough workers in stores to keep shelves adequately stocked.
“Wal-Mart’s inventory is well above their goal,” said Poonam Goyal, an analyst at Bloomberg Industries. “Most of the inventory increase was because of missed sales.”
The Bloomberg report caused some trepidation on Wall Street today. Shares of Wal-Mart (NYSE: WMT) fell $1.10, or 1.5 percent, to $74.65. The Dow and S&P logged its fifth straigh day of declines.
Keeping the Shelves Full
Ironically, Wal-Mart’s also been battling to keep its store shelves full, because the retailer hasn’t had enough workers to keep up with restocking. It does plan to heavy up on warm bodies for the looming holiday sales season, hiring 55,000 seasonal workers and is elevating 70,000 more to part- or full-time positions.
Still, analysts are expecting a less-than-stellar holiday season, particularly in light of disappointing back-to-school spending. ShopperTrak of Chicago predicts holiday sales will rise 2.4 percent, but adds that retailers “will have to work to earn their share.” It said shoppers are expected to visit fewer stores, with total retail store traffic down from last year:
“Although the economy continues to recover slowly, consumers remain cautious about spending and are not ready to splurge,” said ShopperTrak Founder Bill Martin. “Even though online buying increases each year, brick-and-mortar sales remain retail’s largest profit opportunity. Retailers who deliver a seamless experience both in-store and at every customer touch-point have the chance to capitalize and grab their share of wallet when shoppers visit the stores.”
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