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After listening to Wal-Mart Stores' (NYSE: WMT) prerecorded Q1 earnings conference call yesterday, I was again amazed that the company has been releasing quarterly results without shareholder interaction. Considering the tumultuous year and Q1 period the company witnessed -- April same-store sales were the worst since 1980 (though Wal-Mart was not alone here) and the company has been plagued by PR gaffes along with a general sales slowdown -- would it have killed Wal-Mart management to answer some questions?

One thing that stood out was CEO Lee Scott's admission that Wal-Mart may see Q2 earnings below expected forecasts. Although Wal-Mart's profit rose 8% in the Q1 period from the year-ago quarter, Q2 earnings may fall flat. Scott also said that Wal-Mart would become more aggressive this summer in "lowering prices" to gain back sales in the U.S. Since the retailer has specifically stated that it wants to sell higher-margin goods in increasing amounts to boost profits and recruit affluent shoppers, this is a mixed message in my book.

Scott also said that "apparel mistakes" in the company's merchandising cost the retailer serious market share, as lower-priced clothes sold in amounts that differed quite a bit from forecasts, causing inventory issues. You see, when customers come in for lower-priced, private-label clothes and the most popular styles are consistently out of stock, those customers probably won't stay long and browse through other Wal-Mart areas buying other things. The "traffic" and "ticket" metrics start to become eroded, and Wal-Mart sales suffer. That's the importance of correct retail forecasting when you have gas prices and other factors already against you. The good news is that international sales, grocery sales and Wal-Mart's $4 pharmacy drug program performed very well in Q1, and these areas will probably do well in Q2.

Wal-Mart lowers Q2 outlook, apparel forecasting cited originally appeared on BloggingStocks on Wed, 16 May 2007 11:14:00 EST. Please see our terms for use of feeds.

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