Wal-Mart cautious about holiday sales, promises to add more workers

A higher sales tab is the number one wanted item on Wal-Mart’s Christmas wish list and the mega retailer is somewhat optimistic that will happen thanks to lower fuel prices and a slightly better overall economy.

“This time last year we faced the debt crisis uncertainties, SNAP cuts (food stamps) were taking hold and higher gases were also weighing on consumers,” said Charles Holley, chief financial officer for Wal-Mart, said during a media call on Thursday (Nov. 13). The media call was associated with the company’s fiscal third quarter earnings report.

That said, Wal-Mart is not leaving the holiday sales to chance. Greg Foran, CEO of  Walmart U.S., said he met Wednesday (Nov. 13) with store mangers for two hours to make sure everyone was on the same page going into the holiday season.

He admitted the popular electronics segment is again under pressure from price deflation and lack of innovation. With that he expects Wal-Mart to sell more electronic items and make less money on this category than last year. Foran said layaway use is strong, but gave no year-over-year comparison.

“As I traveled to stores I see up to 100 containers out back (of each store), which is an indication that lots of shoppers are using the layaway option this year,” Foran said.

Promotions are deep and Wal-Mart expects that to weigh on its fourth quarter earnings. Adding labor during the busier holiday season will also pressure earnings.

“We expect this holiday season to be highly competitive. … We’ll continue to see pressures to the bottom line as we balance wage leverage with higher customer service standards. We recognize we have opportunities amid the challenges,” Foran noted in the pre-recorded earnings call.

One of those opportunities is potentially more disposable income for the Walmart shopper.

“Customers have a little more discretionary spending power in the coming months from lower gas prices. We’re enthused by our holiday plans across the box and online,” Foran said.

David Strasser, analyst with Janney Capital Management, said perhaps the worst of it is behind Wal-Mart, having retuned to positive comp sales for the first time in since 2012. Strasser said in all of the pre-holiday retail ads he’s reviewed there appears to be more posturing than promotions through discounts, which is better for retailer margins. 

Foran said the retailer is using more price rollbacks, with around 20,000 announced in recent days and he expects consumers to respond favorably. Holley said consumers are not afraid to spend when they recognize a true value.

“We see this over and over when we promo large ticket items or bring new products they want to market. We have to give consumers a reason to shop with us,” Holley said.

Wal-Mart execs admis there is still lots of things it can and will do better, starting with customer service. The retailer plans to spend an extra $70 million in wages during the holiday season with added front-end labor in its promise to make sure more registers are open during peak shopping periods.

Declining store traffic is an ongoing concern, but Foran said in recent weeks the trend has been improving. He said his “urgent agenda” memo sent to store managers recently    was needed as he has promised to do a better job managing fresh items such as produce, deli and meats. The memo went to 32 departments and asked stores to find creative ways to sell clearance items and to keep "complete records of daily throws" of meat and poultry.

Foran said Wal-Mart will do a better job as shopkeepers and he knows that will mean additional labor, which is why he’s evaluating the labor mix for the fourth quarter and beyond.

OUR Walmart member Janet Sparks, a nine-year customer service manager at a Walmart store in Baker, La., said it’s gratifying to hear that Wal-Mart executives plan to address store labor, but she hasn’t seen these changes take place as of yet. Sparks’ message coincided with the early Thursday earnings report by Walmart and was pushed out by the union-funded group.

Sparks said it has been store understaffing that has contributed to wasted food and dirty shelves in the grocery department. She said her store routinely has long checkout lines because there are not enough cashiers and customer service managers scheduled to work.

Foran vows to address the labor constraints but said that’s just part of the problem. He knows there is work to do get stores to what he deems an acceptable level.