Housing Woes Take Toll On Major Chains

NEW YORK — Wal-Mart, Sears and The Home Depot reported disappointing results for their second fiscal quarters, citing the weak housing market and soft macroeconomic environment.

At Wal-Mart, net sales for the second fiscal quarter, ended July 31, were $92 billion, an increase of 8.8 percent over the prior year period, while income from continuing operations increased 4.1 percent to $3.1 billion. Total same store sales in the U.S. rose 1.9 percent.

"Although some people will report that Wal-Mart has had record sales and earnings, our underlying operating performance this quarter is not what we expect of ourselves, and not what our shareholders expect of us," said Lee Scott, president/CEO of Wal-Mart Stores. "For the remainder of this year, our management team is focused on inventory improvements, delivering quality products at low prices, and store execution at the highest standards."

Scott noted that consumers worldwide are being stretched financially, and suggested that the company is championing their cause by offering goods at affordable prices. "Many customers around the world continue to be under economic pressure and they expect Wal-Mart to be their advocate," he said. "We will continue to be the undisputed price leader, from Asda in the United Kingdom, to every market in the United States."

Wal-Mart has also lowered its earnings guidance based on "economic trends that have developed in many of our major markets," said chief financial officer Tom Schoewe.

Separately, Sears Holdings reported declines in same-store sales for its second fiscal quarter, ended Aug. 4.

Comp-store sales slipped 3.8 percent at Kmart and 4.3 percent at Sears for the 13-week period. The company said the comp declines were recorded across most categories at both chains, although Sears managed to partially offset the downturn with increases in CE and apparel.

Sears Holdings has narrowed its projected second quarter net income range to between $170 million and $185 million, compared to net income last year of $272 million, excluding a one-time gain. The company said it experienced higher markdowns, largely in seasonal apparel, that were offset by lower payroll expense and reduced inventory shrinkage.

In a statement, CEO Aylwin Lewis said, "While we recognize the housing market slowdown and other economic pressures have presented a noticeable headwind to the business, we are disappointed with our second quarter results. We will work hard to improve our financial performance going forward."

At The Home Depot, earnings from continuing operations fell 11.8 percent to $1.5 billion for the second fiscal quarter, ended July 29, while net sales slipped 1.8 percent to $22.2 billion and comp sales fell 5.2 percent. In a statement, chairman/CEO Frank Blake said, "The challenging housing market continues to present us with a tough selling environment," and that the housing market is expected to remain soft into 2008.