Wal-Mart shares drop on report of inventory cuts
Bloomberg News says the retail giant is telling suppliers it's trimming inventory buying because consumers are still reluctant to spend big.
By Charley Blaine 3 hours ago
Updated: 4:38 p.m. ETThe word for Wednesday was Wal-Mart, as in Wal-Mart Stores (WMT -1.45%).
The shares briefly dropped as much as 3% Wednesday after Bloomberg News reported that the discount colossus had told suppliers it is cutting orders for the balance of the third quarter and the fourth quarter. Between 1:25 p.m. ET and 1:40 p.m., the shares fell nearly 1%.
They rebounded off their low of $73.56, but still closed down $1.10 to $74.65. The stock had the largest percentage decline among the 30 stocks in the Dow Jones Industrial Average ($INDU -0.40%).
The blue chips closed down 61 points to 15,273, their fifth loss in a row. The Standard & Poor's 500 Index ($INX -0.27%) was off 5 points to 1,693, its fifth straight loss as well. The Nasdaq Composite Index ($COMPX -0.19%) dropped 7 points to 3,761, its third decline in four sessions.
Wal-Mart's issue is that inventories grew 5.5% in the fiscal-second quarter to $42.8 billion, and the company has acknowledged that consumers aren't spending as much as expected in Wal-Mart stores. The company has insisted that consumer spending has been trimmed this year after Congress boosted the payroll tax by two percentage points.
Plus, Bloomberg wrote, "the company has forfeited some sales because it doesn't have enough workers in stores to keep shelves adequately stocked."
Problems with stocking has been a longstanding complaint about Wal-Mart.
The warning about lower purchases may be the first ever, a supplier told Bloomberg.
Wal-Mart spokesman David Tovar told Bloomberg that the order cuts are not across the board. Instead, it's occurring "category by category," he said.
Wal-Mart was worth 7 points of the Dow's loss on Wednesday. Visa (V -0.92%), which joined the Dow only this week, contributed 11 points to the Dow's loss; Johnson & Johnson (JNJ -1.29%), down 41.14 to $87.08, trimmed the Dow by 7.3 points.
Retailers are already bracing for a tough holiday season. ShopperTrak, the Chicago market-research firm, projects holiday sales to rise 2.4% over 2013, the smallest gain since 2009.
After reporting that U.S. same-stores sales fell 0.3% in the fiscal-second quarter, Wal-Mart cut its annual earnings forecast to $5.10 to $5.30 a share from $5.20 to $5.40.
The company expects fiscal-third quarter sales in the U.S. to be "relatively flat," compared with a 1.5% gain a year earlier.
The price decline for Wal-Mart shares looks to have affected other retail shares. Target (TGT -1.05%) was off 65 cents to $63.26. Costco Wholesale (COST -0.80%) dropped 93 cents to $115.41. Abercrombie & Fitch (ANF -1.46%) fell 55 cents to $37.05. Macy's (M -1.79%) fell 78 cents to $42.80.
The sector also was affected by the ongoing woes at J.C. Penney (JCP -14.96%). Its shares were down $1.78 to $10.12 after hitting a low of $9.93. Not only was that low price a 52-week low, but the shares are trading at their lowest levels since November 2000.
The market has been weighed down by increasing worries about a possible government shutdown next week, uncertainty over the Federal Reserve's plans to trim its bond-buying program and global economic and political uncertainty.
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