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Tue, Nov 30, 2004 - Page 12 News List

Wal-Mart shares may take a beating

RETAIL MARKET Investors may unload the shares on expectations of lower sales growth this year after the firm's decision to reduce discounts appeared to have dented holiday sales

AP , NEW YORK

Lucinda Antal, of Liverpool, England, left, picks up her purchases from a Williams Sonoma shop in New York on Sunday. Antal spent between US$700 and US$800 on items for herself and Christmas gifts for others during her visit. The Visa credit card group said consumer purchases on its cards on the day after Thanksgiving, which marks the beginning of holiday shopping season, grew by over 15 percent this year compared with last year.

PHOTO: AP

The damper on this week's holiday shopping launch, Wal-Mart Stores Inc, was at risk of seeing its shares pummeled yesterday amid signs that its decision not to discount as heavily this year curbed sales growth. But don't expect to see the sell-off spreading to the rest of the retail industry stocks, an analyst said.

That's because Wal-Mart has its "own unique set of circumstances," Richard Hastings, retail analyst at Bernard Sands LLC, said on Sunday.

reduced discounts

In an effort to defend its profits, the world's largest retailer did not discount as deeply on a wide array of products as it has in the past. That hurt sales the day after Thanksgiving, the official start of the holiday shopping season, as other competitors like Sears, Roebuck and Co lured shoppers with deeper price cuts.

Customers tend to be price-sensitive and go to Wal-Mart to take advantage of the blitz of deals.

The company said Saturday that November sales at stores opened at least a year would be up only 0.7 percent, instead of the previously projected 2 percent to 4 percent, based on disappointing sales for the seven days ended Friday.

Wal-Mart, based in Bentonville, Arkansas, and other retailers are expected to report sales for this month on Thursday.

focus on profits

"Wal-Mart is getting serious about profits, and they're not as obsessed about market share, which means they are getting careful about sales promotions and inventories -- things that impact expenses and cash flow," Hastings said.

But with disappointing sales, investors face concerns that fourth-quarter profits at the world's largest retailer might be "a little challenged," he added.

Analysts polled by Thomson First Call expect US$0.75 per share for the retailer's fourth quarter.

On Friday, shares of Wal-Mart closed at US$55.32, down US$0.18, which is at the lower end of its 52-week range of US$50.50 to US$61.31.

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