Walmart's typical customer is still not spending.
On Tuesday, the big-box retailer posted its seventh consecutive quarter of falling U.S. sales. And, despite news that consumer confidence hit a three-year high in February, it could be some time before that changes.
Same store sales at Walmart supermarkets and Sam's Club warehouse stores fell 1.8 percent between 2009 and 2010, the company announced today. Despite slashing prices to lure shoppers, the stores saw fewer customers over the holiday shopping period.
Dependent on U.S. consumers still reeling from the recession, the world's largest retailer may not see strong domestic growth any time soon, said Joseph Feldman, analyst at the Telsey Advisory Group.
The American consumer has split distinctly into two groups, Feldman said. Higher income earners face unemployment as low as 5 percent, and are spending more. But Walmart's core customers, the two-thirds of the U.S. population earning middle and lower-income wages, still face unemployment in the low double-digits, he said, and are less likely to dramatically increase spending.
The company's overall revenue increased by 2.5 percent, to $115.6 billion, but most of the gains were made by Sam's Club stores, and in Walmart stores outside the U.S. The supermarket chain has expanded into 14 other countries, including the United Kingdom, India and Japan. Walmart sales outside the U.S., led by demand in Brazil, Mexico and China, rose by 8.9 percent to $31.4 billion.
"Sales were a bit on the soft side," said Telsey analyst Feldman. "Investors had thought they'd be slightly negative, but not 1.8." Despite decent earnings, Feldman said, the poor sales had sparked a stock sell off.
Bentonville, Arkansas-based Walmart has struggled since a 2009 decision to reduce the number of items in stores -- which was reversed last year -- and has lost customers to better deals at dollar stores, Reuters reported.
"We are disappointed by Walmart U.S. fourth quarter sales," CEO Mike Duke said in a statement, adding that it could be some time before sales improved.
"Some of the pricing and merchandising issues in Walmart ran deeper than we initially expected, and they require a response that will take time to see results," he added.
Food sales were among the best performing at Walmart stores, Duke added. But with the impact of rising commodity prices expected to affect supermarket prices on this year, the chain could be further squeezed.
Walmart initially thrived when the recession hit in 2007, as low prices drew shoppers to the retailer.
Then, in 2009, Walmart overhauled stores, getting rid of 20 percent of its stock of groceries, and 100,000 different products overall. Prices at the chain started to rise. Customers started to complain, and many went elsewhere.
As a result, revenue at Walmart stores open for at least a year has fallen by an average 0.75 percent each quarter, according to the International Council of Shopping Centers, while revenue rose by an average of nearly 1.7 percent at Target, 8 percent at Costco and 5.9 percent at Family Dollar, AP reported.
To fight the decline in U.S. sales, Walmart is emphasizing low prices and returning thousands of products to shelves. There are also plans to expand into cities that have resisted the chain, like New York.
"They seem like they got further afield of their traditional roots," said Feldman. "Traffic continues to be an issue." But, he added, they were already seeing some success with their plans to re-enforce their practice of offering "everyday low prices."