• Andrea Lillo

Wal-Mart sees share gain, not end of recession

Bentonville, AR — While economic forecasters are beginning to call the recession a done deal, the economy still looks slack from Wal-Mart's perspective.

In remarks to investors last week following the release of fourth quarter and fiscal earnings results, executive vp and cfo Tom Schoewe noted that, although fiscal 2003 "began a lot better than last year" and consumer spending is not declining, the economy is still status quo.

"Ever since the end of December, we've exceeded our internal sales plan," he said. But he cautioned that higher-than-expected sales resulted from an increased customer count. Wal-Mart sees that as an indication that it is gaining share, rather than a sign that consumer spending has rebounded.

The average transaction rate has not yet indicated acceleration, he added. "The evidence is not strong for us to believe the economy has turned a corner."

Though the company experienced record earnings and sales for the fourth quarter [see story page 16], the decline in gross margin by 24 basis points resulted in part from a shift in consumer spending toward opening-price-point merchandise and basic items, Schoewe said. And though sales have recently improved, he added, there is "no clear evidence that the opening-price-point phenomenon has abated."

Wal-Mart rolled back prices on approximately $9.3 billion in sales during the year, he said, slightly lower than the previous year. And in the last half of the year the retailer shifted more dollars toward competitive markdowns to adjust for the aggressive promotional environment. "We anticipate returning to more normal levels of rollbacks in the current fiscal year," he said.

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