Wal-Mart signals strong start to holiday season
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Nov 26, 12:01 PM (ET)
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By Emily Kaiser
CHICAGO (Reuters) - Wal-Mart Stores on Saturday reported better than expected post-Thanksgiving sales as Americans snapped up discounted computers and toys at the start of the crucial holiday shopping season.
As consumers grapple with steep energy prices and rising interest rates, investors are watching closely for any sign of a spending pullback. Overall, analysts expect modest holiday sales growth, and were looking to Thanksgiving weekend as an early indication of demand.
The November-December holiday season typically accounts for about one-fourth of annual retail sales, and the biggest chunk of profits for jewelers, electronics chains and clothing stores.
"If we see (after-Thanksgiving) sales growth over 5 or 6 percent, that's a very positive indication of a good holiday season, if they can sustain it," said Darrell Rigby, head of the global retail practice for consultants Bain & Co.
Wal-Mart, the world's biggest retailer, estimated that November sales rose 4.3 percent at its U.S. stores open at least a year, a key retail measure known as same-store sales. The figure was toward the high end of its forecast for 3 percent to 5 percent growth.
The retailer said demand for the day after Thanksgiving beat its expectations at both its namesake discount stores and the Sam's Club warehouse chain. Computers and dolls were among Wal-Mart's best sellers on Friday, known in the industry as Black Friday because it traditionally marked the date when retailers began turning a profit for the year.
Department store operator J.C. Penney Co. Inc. said shoppers were in a spending mood on Friday and spent heavily on apparel, accessories and home gift items, adding it was optimistic for the rest of the season.
AGGRESSIVE APPROACH
"Friday was a record day for the company and clearly exceeded our expectations. We feel we have good momentum going into the holiday," said Ken Hicks, president and chief merchandising officer for J.C. Penney.
J.C. Penney offered a range of specials, including women's leather jackets for $48.88, diamond rings for $99 and DVD players for $88.88.
Wal-Mart reported a disappointing 0.7 percent increase in November same-store sales because it kept prices too high, driving customers away.
This year, the retailer vowed to learn from that costly mistake. Wal-Mart launched its advertising campaign on November 1, the earliest in company history, and slashed prices across the store. The strategy appears to have paid off.
"We were pleased with what happened yesterday in terms of sales and think the approach that we took in being aggressive on all levels was appropriate," Wal-Mart spokeswoman Gail Lavielle said.
Indeed, customers at an Orlando, Florida, Wal-Mart were so eager to land a bargain that they tussled over low-priced laptop computers, prompting security guards to step in, television reports showed on Friday.
Analysts are still waiting to see whether Wal-Mart's strong performance came at the expense of rivals. Target Corp. warned earlier this month that November sales would miss its forecast, which analysts blamed at least in part on Wal-Mart's aggressive advertising and discounts.
Retail research group ShopperTrak is expected to give its Black Friday sales estimate later on Saturday, and major retailers will release November results later this week.
Bain's Rigby said he spent 12 hours touring stores in the Boston area on Friday, and electronics sections were the busiest. Bargains were the big draw, he said.
But Rigby cautioned against reading too much into what he called "observational economics" at a handful of stores. "I don't think we will really know (if sales were good or bad) until we see the register receipts coming in," he said.
(Additional reporting by Doris Frankel)
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