Here’s The ‘Potent One-Two Punch’ That Has Wal-Mart Execs Freaking Out In Internal Emails (WMT)
Emails dug up by Bloomberg News have revealed that Wal-Mart is having a terrible start to the month.
In fact, it’s the worst start to a month in seven years for the world’s largest retailer, and a “total disaster,” according to the emails.
They’re freaked out and they’re blaming a couple specific factors.
Two execs, finance and logistics VP Jerry Murray and U.S. replenishment SVP Cameron Geiger, called out increased payroll taxes and delayed tax returns as the culprits.
Geiger called them “a potent one-two punch” in one of the leaked emails.
So, what’s going on here?
- In 2012, shoppers had received nearly $20 billion more in tax refunds by this time of the year, according to Wal-Mart Global Customer Insights & Analytics division. Now, Wal-Mart expects returns to be delayed by three to four weeks.
- Back on December 31, a payroll tax break expired, and American started to pay 2 percent more in Social Security taxes. For someone making $40,000 a year, it’s about $15 more a week. Or, for a family making $30,000, it’s about a year of car insurance, according to Wal-Mart.
Now, look back to January. Consumers still hit the stores despite the tax hike and general merchandise came out pretty strong.
The Census Bureau reported that overall retail sales rose a seasonally-adjusted 0.1 percent during the month, which was in line with expectations.
But this doesn’t paint the full picture.
January has always been considered “clearance” month. Retailers traditionally mark down a lot of their wares in order to get rid of winter merchandise leftover from the Christmas rush.
For instance, look at this massive 75 percent off clearance day Wal-Mart had at the beginning of January.
It’s a particularly appealing time to shop for those who don’t have much left in their wallets.
“Consumers were shopping and hunting for those clearance items,” Michael Niemira, chief economist at the ICSC, told USA Today. “Despite the strong reading, January may be one of the highest points of the year.”
And now, those two punches identified by Wal-Mart execs seem to be hitting in force, without the big clearances of old holiday merchandise to prop it up.
Which begs the question: if a mega-giant like Wal-Mart is struggling in the face of these external factors, what about its weaker competitors?
“It could mean that more retailers are researching and will put out major earnings warnings,” said NBG Productions chief equities analyst Brian Sozzi. “There’s no reason to be optimistic.”
We’ll get a lot more information on February 21 when Wal-Mart reports its Q4 earnings.
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