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Wal-Mart keeps fingers crossed
CEO Scott lists higher energy prices, economy as ongoing concerns; optimistic about holiday season.
September 8, 2004: 1:38 PM EDT
By Parija Bhatnagar, CNN/Money staff writer

NEW YORK (CNN/Money) - Wal-Mart's CEO Lee Scott said Wednesday that higher energy prices and worries about the economy are the two biggest concerns for its customers, although the discount behemoth remains optimistic about the upcoming holiday shopping season.

"Will August translate into a difficult Christmas? We don't think so. I believe it will be what we have planned for. We have a good assortment and are well-priced for the fall," said Scott, who spoke to an industry gathering at Goldman Sachs 11th annual Global Retailing conference in New York. His presentation was monitored via Web cast.

In August, Wal-Mart (WMT: Research, Estimates), the world's largest retailer, reported disappointing sales at its stores open at least a year, up just 0.5 percent (WMT: Research, Estimates) for the period. The result was also at the low-end of its forecast for a flat to up 2 percent gain in sales for the month.

Its total same-store sales are up 5.2 percent in the first half of the fiscal year.

The anemic rise in comparable sales was particularly worrying to industry watchers given Wal-Mart's stature as a retail bellwether that is often regarded as a gauge of consumer spending.

It has been a so-so summer for retailers across the board, with many -- including Wal-Mart, blaming weather, higher prices at the pump and sluggish back-to-school business for soft sales.

"These are challenging times. Energy prices have risen to the top and that's the No. 1 reason of concern for our customer," said Scott. "Wal-Mart's core customer is economically challenged. Higher energy prices take disposable income out of the pocket. This is money that they don't have any more to spend."

"Secondly, we think the political tone is impacting our customer," Scott added. "The economy is improving but if you listen to the TV, you would think that the economy is in terrible shape. That makes people very worried. Third, the threat of terrorism and war are still weighing on peoples' minds."

"I want to say that you don't need to get overly depressed. Christmas will come and fall will come," Scott said.

Guidance holds

While Wal-Mart said it expects third-quarter earnings to come at the low end of its forecast of between 52 to 54 cents a share, Scott said the company's full-year guidance remains intact at between $2.36 to $2.40 a share.

Analysts expect the retailer to earn 53 cents a share for the third quarter and $2.38 for the full year, according to First Call.

Scott said questions about Wal-Mart's growth slowing down were somewhat misplaced. "We have between 320 to 345 new projects this year, including about 240 new supercenters and between 40 to 45 discount stores and we're adding 50 million square feet of new retail space."

At the same time, Scott said the retailer can't afford to rest on its laurels.

"We need to make sure we're relevant in price and merchandise in these time," Scott said. "I feel OK about Wal-Mart stores but we need to get better with fashion and we need to put the foot on the pedal when it comes to store growth."

Its reputation is also something that Wal-Mart can ill-afford to neglect, said Scott.

Wal-Mart, which employs 1.3 million workers and is the nation's largest private-sector non-union employer, has been a lightening rod for dozens of lawsuits against it alleging wage-and-hour violations and gender discrimination. Last year, Wal-Mart was accused of allegedly hiring illegal immigrants through a contractor and underpaying those employees.

Under fire or its employment practices, Wal-Mart recently announced it was overhauling its pay and promotion policies.

"We try to look at the criticism and where appropriate we will compromise. But we will fight it if it is wrong," said Scott. "We thought we could sit in Bentonville (Ark.), take care of customers, take care of associates, and the world would leave us alone. We haven't gotten our story out to the extent that we need to get it out. And we have to hold people to a higher standard."  Top of page

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