Friday, October 19, 2007

Wal-Mart Cutting Prices

From USA Today:

Wal-Mart (WMT) is cutting prices on 15,000 more items this week — 20% more than last year — and plans to slash more prices in coming days to boost sales during the holiday season.

The world's biggest retailer cut prices earlier this month on some of the hottest holiday toys, hard-to-resist deals that could help counter concerns about toy safety.

"Discounting is starting early and often this year," says retail strategist John Champion of global consulting firm Kurt Salmon Associates. "Wal-Mart is anxious about the Christmas season and trying to get an early jump with the consumers. Other retailers are going to follow suit."

The latest cuts come as consumers face continued economic pressure from a shaky real estate market and high energy costs, making it an especially good move for Wal-Mart, says Phil Rist, executive vice president at consumer insights firm BIGresearch.

Remember this chart from This Week in Petroleum?

Wal-Mart things gas prices are a factor as well and they are doing something about it.

However, it is standard practice for retailers to issue concerned guidance before the holiday season. This is called "expectations management". By issuing concerned guidance it's easier for retail/holiday sales to over-perform, making an increase in stock price look more important.

In addition, counting out the US consumer is never a good idea. The US consumer has a penchant for spending -- and finding the money to spend especially during the holiday season.