Doug McMillon becomes chief executive of Wal-Mart Stores (WMT), the world’s biggest retailer, on Saturday. It was always going to be a tough job, and it just got tougher. Wal-Mart offered a preview of its sales and profit for the holiday season as well as the full year. Actually, it was more like an early warning. The company said sales at its U.S. stores and Sam’s Club warehouse division will be worse than expected, with profit at the low end of its estimates. The full report comes Feb. 20.
The list of explanations for Wal-Mart’s disappointing performance is long: In the U.S. the company had to offer even lower prices during the holidays to try to match competitors such as the dollar stores and Amazon.com (AMZN). A reduction in the Supplemental Nutrition Assistance Program, otherwise known as food stamps, went into effect Nov. 1 and hurt sales. The layoffs this month of some 2,000 employees at Sam’s Club carried some costs. And the weather was really bad.
Wal-Mart’s international business, which McMillon used to lead, didn’t fare too well either. The company closed 50 stores in Brazil, where Wal-Mart has struggled to compete in a slowing economy, and China, where the retailer is moving into smaller cities to help it outdo local rivals. And dissolving agreements in India, where the company’s ambitious plans to open hundreds of supercenters have been delayed, proved more expensive than anticipated.
Some of these problems are specific to Wal-Mart, leaving aside the costs connected to a bribery investigation and worldwide compliance review. But Wal-Mart isn’t the only retailer to temper its expectations, lay off workers, or close stores after the holidays. Cold comfort for McMillon.