Confidential Wal-Mart Memo Discloses Substantial Drop In Store Traffic Compared To Year Ago

Tyler Durden's picture

As if we needed another confirmation that the US consumer is running on empty, here comes Bloomberg with valuable disclosure from an internal, and supposedly confidential, Wal-Mart memo on store traffic patterns which indicate that in US store locations open for at least a year have seen a 2.6% drop in traffic in the February to June period compared to a year earlier. While this may not sound huge, keep in mind the company is massively leveraged to even the smallest marginal moves in traffic, courtesy of already razor thin margins. Specificall, the Wal-Mart stores in question had "82.8 million fewer visits through the first five months of the company’s fiscal year." More than anything this is an indication of just how exhausted the US consumer is becoming if even the most beloved, widespread and cheapest option for purchases is now being shunned outright. Bloomberg continues: "Wal-Mart’s plan to recapture customers by returning thousands of products to U.S. store shelves has failed to reverse a decline in foot traffic at the world’s largest retailer, said Jeff Stinson, an analyst at Cleveland Research Co. That’s primarily because Wal-Mart’s core low-income customers are shopping less and going to other retailers more often, according to two recent shopper surveys." This should not come as a surprise to anyone, since frequent Zero Hedge readers will recall the post in which the CEO of Wal Mart America said that "shoppers are running out of money"; and there is no sign of a recovery." When it comes to marginal traffic, it appears shoppers have just run out of money. And that includes those who no longer pay their mortgage and pay for everything with their now well maxed out credit cards.

Bloomberg reports:

Wal-Mart, led by Chief Executive Officer Mike Duke, is restoring an average of 8,500 products to its stores to lure back shoppers still pinched by persistent unemployment and gas prices that have risen 36 percent in the past year. Sales in U.S. Wal-Mart stores open at least 12 months have declined for eight straight quarters.

 

Wal-Mart’s traffic decline comes as some of its direct competitors are getting more visits.

 

Wal-Mart’s decline is close to the 2.5 percent drop in shopper traffic at all retailers from February through June, according to retail industry data provider ShopperTrak in Chicago.

 

The two shopper surveys, from Morgan Stanley and retail consultancy WSL Strategic Retail, found that the removal of items from stores in 2009 to reduce clutter wasn’t among the top reasons why shoppers are visiting Wal-Mart less frequently.

 

“Consumers are not very concerned about removed items or breadth of assortment,” Mark Wiltamuth, an analyst at Morgan Stanley, said in a July 11 report that included the survey. In the WSL survey, 7 percent of Wal-Mart shoppers said they were going there less because it stopped carrying products they buy.

The scariest news for Wal-Mart: it no longer has the deep discount retailer halo it has held for decades:

Many shoppers don’t believe Wal-Mart’s prices are the lowest anymore, the surveys found. These consumers are shifting more of their spending to dollar stores, Target, and supermarkets such as Kroger’s, WSL said. Both surveys polled about 1,500 shoppers.

“The biggest surprise from our survey is that Wal-Mart appears to have lost some of its low-price reputation,” Wiltamuth said in the report. “Wal-Mart now has a price perception problem.” The New York-based analyst rates the shares “equal-weight.”

“They are taking incremental mini-steps at a time when they need to knock shoppers’ socks off,” Liebmann said.

The possible culprits for the drop are many, but none of them change the fact that there is less shopping happening:

Traffic declined by an undisclosed amount at U.S. Wal-Mart stores in the fiscal year ended Jan. 31 after increasing 1.3 percent in the previous year. Shopper visits continued to drop in the first quarter of the current fiscal year. Duke has said customers are making fewer shopping trips and spending less when they do shop because of higher gas prices.

 

“Our priority right now is trying to provide that opportunity for customers to go to one place and have everyday low prices on the full assortment that they purchase,” Duke said at an April investor conference.

 

Wal-Mart has forecast that the change in second-quarter fiscal 2012 comparable-store sales in the U.S. would be negative 1 percent to positive 1 percent. Cleveland Research estimates same-store sales to be down as much as 2 percent.

 

“The data points don’t look great,” Dan Binder, an analyst at Jefferies & Co., said in an Aug. 2 note to clients. “There is downside risk to sales in the second quarter and potentially over the balance of the year.” The New York-based analyst cut his recommendation to “hold” from “buy” in the note.

 

In a May study from Deloitte Research, almost three out of four respondents said they are making fewer trips to the grocery store to save money and two-fifths said they are purchasing fewer items overall.

The worst news is that despite 3 years of failed attempts, US consumers appear happy to redirect funding from other sources of cash use, such as paying for mortgage (which will end up being the reason for a TARP 2 bailout of the banks soon enough), but far more averse to actually levering up, or, if they wish to do so, appear to no longer have the capacity. Which is easily the worst possible news for the Fed which is now actively preparing to launch QE3.

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LMAO's picture

Confidential and thus printed here.

EvlTheCat's picture

Did you even read the opening paragraph before you posted?

LMAO's picture

No, I don't give a fuck. I'm a headline chasing HFT algo and that's why we are bouncing of the lows on this Bloomberg wall-mart concoction which isn't worth a bucket of spit. But, but, feel free to read any garbage of your liking.

Fish Gone Bad's picture

I frequent a Mexican supermarket that is fairly close to a Ninty-nine cents only store.  I listen to the customers as they shop and they are constantly making comparisons to Wal-Mart.  The closest Wal-Mart is maybe 4 miles away.  Towards the end of the month, a lot of local stores will have few customers in them, including the Staters Brothers supermarket.

A.W.E.S.O.M.-O 4000's picture

"I frequent a Mexican supermarket"

 

Well excuse me John D. Rockefeller!

Richard Head's picture

So how's that WMT long position going?

samslaught's picture

wasn't welfare recently reduced by 10% or so?

samslaught's picture

wasn't welfare recently reduced by 10% or so?

Moe Howard's picture

10% welfare reduction + 10% welfare reduction = 20% welfare reduction? Really?

JR's picture

Isn’t breaking into confidential information Murdoch’s specialty? Is Bloomberg now taking over where Murdoch left off? And, of course, there’s the believability factor.  It’s difficult enough to believe government reports let alone Bloomberg’s analysis of government reports; and now we’re supposed to believe “leaked” reports of a company that Bloomberg would not be supporting.

Shades of Schumer versus IndyMac?

And, to make matters more suspect, this story is, in essence, six months old.  Somebody has just warmed over the story and attached some statistics to it.  It’s just a repeat of the banker-cabal attack on Wal-Mart.  Bankers don’t like Wal-Mart? How about that avalanche that materialized when Wal-Mart tried to establish its own bank?

Spot on, LMAO.

LMAO's picture

Schhhh, you are stirring the sheeple and they are in Junk-mode.......

Redstone's picture

BOO! Whoops. I didn't mean to start a cattle... I mean a sheeple stampede.

Mercury's picture

They can always hope for a last minute, Q4 binge to stock up on 100w incandescent light bulbs before the government makes them illegal in 2012.

UGrev's picture

I have found so many deals at the many dollar stores around my area. Canned foods, rice, beans.. utilty items.. for a buck. 

problemfixr's picture

Keep in mind that you get what you pay for...

UGrev's picture

yeah, I do.. losts of times it's decent brand goods or goods made by the same company for a chain that was bought out on bid. I agree there are some crappy things there too.. but that's why you have to sort through it and pick the good stuff. 

problemfixr's picture

Agreed...My wife picks up a few things there occasionally.  Cannot beat the $1 Mylar baloons.  Just saying that a lot of stuff is junk.  Kitchen stuff, no worries.  I'm just thinking that the $1 food would not necessarily be the highest quality ingredients.  But what do I know? I do not buy food there.

Rodent Freikorps's picture

I lost my mind when I found two-packs of light sticks for a buck.

FEDbuster's picture

I bought a cheap, Chinese made paint roller for $2 at Dollar General the other day, because ACE was a few miles away from the rental I was painting.  It didn't last one room before it broke.  Duct taped it to finish the job, then tossed it.  It was the worst, cheapest piece of crap I had ever used.

burncycl's picture

I hope you're not a professional painter by trade. Trade painters know all too well the cheapies at the dollar stores aren't worth it.

Moe Howard's picture

Hard to sort out the counterfeit Colgate they had a couple of years ago that had anti-freeze in it.

I bought some name brand dishwasher packets there a couple of months ago for a slight discount, then used them later. My wife asked me if there was something wrong with the dishwasher, the dishes and glasses were not very clean, and the forks & spoons were very bad. It took a couple of days before I realized it could be the packets I got at the dollar store causing the problem. So I went to my normal supermarket, bought exactly the same brand and type, and did a load. Night and day. So I don't know if they were selling seconds, QC failures, or counterfeit. I know this, however, I did not get a deal.

I'm all for bargains, but sell me dodgy goods and I don't ever come back.

UGrev's picture

The dishwasher stuff is a known issue. They have removed the phosphates (the shit that actually cleans) from the detergent. From what I understand, it was due to greeny pressures. I bought name brand shit from the store at a much higher price and the same crap  happened with un-washed utensils etc. 

problemfixr's picture

Obviously, at least 5 (for now) ZH members are dollar store shoppers.

Sancho Ponzi's picture

I'm not sure why the article doesn't mention Amazon. I pay AMZN $79 a year, buy tons of stuff, pay no sales tax, don't have to start and drive the car, and have everything delivered to the house in a couple of days. The stuff I can't get from Amazon is purchased at Costco. Pffft WalMart.

malalingua's picture

and with prime membership you get unlimited instant videos. 

UGrev's picture

I have a prime membership too.. I find lots deals on foods and good. The saving on shipping has paid for my account already. 

serndipity's picture

Shopping at the Dollar store is great,  it's so convenient and casual and you don't have to get all dressed up....like you're going to WalMart or something.

Newsboy's picture

Turn off half the lights.

spartan117's picture

Went to a BestBuy and noticed that this is what they did.  It's normally quite bright in there, but not this time around.  Dark as hell.  Not sure if it was for one day or standard policy going forward.

hannah's picture

same here at 2 different best buys....they had the lights turned off on every other aisle. i thought they were replacing bulbs but they usually do that at night and they have to bring out those huge lifts.......

aheady's picture

Walmart turns off the fucking air conditioning.

fallout11's picture

Have noticed this as well, in addition to the lights being "off" frequently. Here in the Deep South it is often 80deg F in the store and people fanning themselves in the checkout lines, which have not shrunk in length any....Wal-mart has also cut back in terms of staffing, usually less than half (or even less than 1/3rd) of the checkout lines are staffed even at "peak" times (weekend afternoons, for instance).  As always, your mileage may vary.

Moe Howard's picture

I was in walmart this afternoon, it is payday week at nearby Fort Knox. The place was a ghost town. I went straight to a human cashier. I saw more employees milling around in the various areas than customers, and got harrassed by a kid in hardware several times, who saw I was buying screws and told me I could buy a bucket of those screws at Lowes for a couple of dollars and would have enough for years. I said that was a good point, however, I need the screws now and Lowes is a 28 mile round trip so the money I saved would be consumed in gas, never mind wasting my time.

My point? I think the sales are down at Walmart in my area. This is not normal, not even a couple of months ago.

BaBaBouy's picture

 

Don't squeeze the Charmin ...

3.7.77's picture

Being beat by the dollar store, what's next maybe a six bit store.

kito's picture

"dollar" store today, "1000 dollars" store next year.....

hannah's picture

the dollar stores around here have about 20% of their merch price above a dollar now. before it didnt matter the size but now if an item is a 'jumbo' size they want $1.39 or $2.99......

Cathartes Aura's picture

"99cent stores" - they're out there apparently.

LoneStarHog's picture

This makes complete sense when compared with the recent data that ILLEGALS (INVADERS) are returning to Mexico for employment, since unemployment in Mexico is 4.5%.

OutLookingIn's picture

Yes. As an interesting aside, border agents are now reporting more illegals climbing the fence to go south!

Idiot Savant's picture

So you're a native american indian, LoneStar??

Richard Head's picture

You should rethink the "Savant" part.

konputa's picture

Sweet, let's ship our unemployed off to Mexico and then build a wall around it.

Dr. Acula's picture

> ILLEGALS (INVADERS) are returning to Mexico

Ah, a socialist.

You think that all land somehow "belongs" to the public, so therefore I can't let Mexicans onto my own property - i.e. the property that I have property rights over - without your permission.

The same lack of ethics that says you can violate property rights in this instance is applicable to many other instances. For example, stealing peoples' wealth through taxation. But of course you haven't thought through things consistently. You just want property rights violated in ways that you choose. 

Missiondweller's picture

That same CEO said he expected a huge jump in inflation by July of this year. Sure would be interesting to hear from him as to whether that is happening.

 

Also too bad we nolonger have MIT's real time inflation numbers. Wonder what ever happened to that?

fuu's picture

It was showing everyone what the Emperor's clothes really looked like.

zuuuueri's picture

you have the gold price, thats a fairly useful working estimate for inflation.