Gas Prices Have Wal-Mart Worried
August 22, 2005-- Home Textiles Today,
Wal-Mart expects rising gasoline prices to affect its core customer base, and thus revised its third quarter comp-sales forecast to be up between 3 to 5 percent, said chief financial officer Tom Schoewe during the retailer's second quarter earnings call last week.
“We believe high gas prices will continue to impact a large portion of our customer base and put pressure on our operating results,” he said.
Lee Scott, president and CEO of Wal-Mart Stores Inc., added that the company is “concerned by rising gas prices” and expects challenges.
The retailer said it will not raise prices. But it is improving its product selection and depth of mid- to premium-price-point merchandise. One example, Scott cited, is digital televisions, which today make up 20 percent of its TV sales.
During the second quarter, comp inventories fared well. “The summer merchandise cleaned up well, and we got an early start to back-to-school,” Scott said. Total inventories grew slightly less than year-to-date sales, but this increase resulted from increases in globally sourced merchandise.
Scott emphasized that while sourcing will increase costs, “It is more than compensated for by higher gross margins.”
Regarding Sam's Club, the company has promoted C. Doug McMillon to replace Kevin Turner as president and CEO. He was previously executive vice president of merchandising and replenishment for Sam's Club.
“Doug will continue with the successful reposition of Sam's that Kevin started, and I do not expect any major change in direction,” Scott said.
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