Retailers are getting into the holiday spirit, and no one is hoping to let it snow -- money -- more than Wal-Mart (WMT 1.32%). The world's largest retailer is struggling, and Wal-Mart is hoping that making its stores more seasonally festive will help return its name to Wall Street's "nice" list.
Wal-Mart plans to doll up its otherwise-barren stores this season. There will be more holiday decorations, and prerecorded Christmas carols will play over store speakers.
However, the real head-turning addition will be Santa Claus. Costumed Kris Kringles may be common at shopping mall hubs and high-end department stores, but now Santa will be a staple at Wal-Mart for photo-snapping opportunities.
Do Wal-Mart shoppers really want to take the time to sit on Santa's lap and tell them what they want? It may not matter. It's logical to think that a more festive environment may encourage shoppers to spend more in the spirit of giving -- even if they are likely at Wal-Mart because they don't have a lot of money to spend or are there to save money.
The only thing that's certain is that Wal-Mart has to do something. It's on a bad path. Revenue growth has slowed to a crawl, and profitability is going the wrong way.
Wal-Mart hasn't been a growth story in years. You have to go all the way back to fiscal 2008 to find the last time that sales grew by more than 6%, and it hasn't been able to break north of 2% top-line growth in three years. Meandering sales growth would be fine if margins were expanding, but net margins are actually contracting. Wal-Mart sees flat sales this fiscal year and a sharp decline in profitability, and it's going to get worse before it possibly gets better.
Shares of Wal-Mart suffered their biggest single-day drop in a decade last month after the discounter painted a bleak portrait of its near-term prospects. It sees sales growth of no more than 3% to 4% through the next few years, and it sees earnings taking another hit next year as it absorbs its latest hike to its starting wage.
Wal-Mart boosted its minimum wage to $9 an hour earlier this year, and that goes up to $10 in three months. It's a move that was lightly applauded by activists -- they want nothing less than $15 an hour -- but February's increase alone will result in $1.5 billion in additional expenses over the course of the year. Wal-Mart's bottom line will absorb some of that, but does it have the pricing elasticity to pass along some of that to its penny-pinching customers in the form of price increases?
So, yes, jolly old St. Nick is coming to Wal-Mart. Don't be surprised if it's Wal-Mart itself that becomes the first to hop on Santa's lap. "So, Wal-Mart, what do you want for Christmas?" "A return to earnings growth would be nice."
