Wal-Mart's sales slowed from August into September and then from September into October, as tax rebate spending petered out. Target experienced a similar decline. While that in and of itself doesn't spell a less-than-merry holiday season for retailers, Wal-Mart was decidedly guarded when it came to talking about its fourth- quarter expectations.
Economists have already started predicting that this holiday season will be stronger than last. That's an easy assertion to make, though, given that last year's retail sales grew at their slowest rate in 30 years. Wal-Mart CEO Lee Scott pointed out as much in the company's pre-recorded earnings call. (Thanks to CCBN/StreetEvents for the transcript.)
Scott also characterized consumers as "very cautious" and said that while he doesn't think spending is slowing, he also "...(doesn't) see the strength that many of you in the investment community appear to see." Perhaps even more chilling is his observation that consumers are "...timing their expenditures around the receipt of their paychecks, indicating liquidity issues."
Ruh-roh. Can you say, "the consumer's all tapped out?" Lee Scott didn't voice it explicitly, but that's sure what it sounded like. The Fool's own Matt Richey wrote about this looming issue in September, saying, "All told, the consumer doesn't look to be in great shape." Bill Mann and Robert Brokamp followed that up with twoarticles in October about the country's rising consumer debt.
If any one company's got its finger on the pulse of the American shopper, it's Wal-Mart. When the big dog talks about weakness, then, it worries everyone and for good reason. Visions of shopping bags stuffed with goodies are already dancing in retailers' heads, but after today, they may be seeing more lumps of coal than anything else.
Are we facing a bleak holiday season or a shiny one? Share your thoughts on the Fool's Wal-Mart discussion board.