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Wal-Mart’s lagging sales may mean holiday price wars

Consumers are likely to benefit from the move while other retailers could take a hit.

NEW YORK — A disappointing sales performance and outlook from Wal-Mart Stores Inc. Thursday raised the possibility of price wars this holiday season — a boon to consumers but a troubling prospect for the entire retail industry.

“The news from Wal-Mart is definitely discouraging,” said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass. “They are going to be very price aggressive. And it is going to have an effect on everyone. It is going to force other retailers to cut their prices, which in turn will squeeze their profit margins.”

The world’s largest retailer, whose sales were dragged down by a failed women’s fashion strategy that went too trendy and by disruptions from a store remodeling program, said it will be using price as a weapon in such areas as toys and electronics to drive holiday sales.

The latest development from Wal-Mart came as the nation’s retailers reported mixed October sales, the result of consumers taking a breather after going on a buying spree in September.

The International Council of Shopping Centers-UBS sales tally rose 3 percent in October, less than the 4 percent gain in September. The tally is based on same-store sales, or sales at stores opened at least a year. Same-store sales are considered the best indicator of a retailer’s health.

Still, Perkins believes shoppers will regain their stride during the holiday shopping season. Consumers have been resilient even when energy prices soared earlier in the year. The decline in gasoline prices that began in late summer has helped ease the financial pain consumers have felt.

Analysts are still sticking with their forecasts for robust holiday sales gains, though not as strong as a year ago. The National Retail Federation projected a 5 percent gain in total holiday retail sales for the November-December period, less than the 6.1 percent in the year-ago period.

But consumers’ willingness to spend depends largely on their job security. While the job market has been steady, recent monthly reports from the Labor Department have showed slower growth. And consumers’ confidence, while still high, weakened in October, dragged down by their concerns about the job market, according to the Conference Board.

“They (Wal-Mart) are going to be very price aggressive. And it is going to have an effect on everyone.”

Ken Perkins President of RetailMetrics LLC
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