October 15, 2015: If Walmart investors are “startled” by the retailer “slashing its sales forecast for the year,” as The New York Times reports today, they haven’t been paying attention. “Sales will be flat this year, Walmart said at a meeting with investors in New York. The retailer previously said that it expected net sales to grow 1-2 percent for the current fiscal year, through January,” according to The Times.
Bad news? Of course. Startling? It shouldn’t be.
Walmart and others previously reported softer-than-expected back-to-school sales, which are generally a harbinger for the holiday season. But retailers overall tend to be optimists at the beginning of the year, as they talk it up to vendors and investors. The optimism gets toned down when reality sets in beginning in the calendar third quarter.
Sticking with Walmart and looking at the last few years:
October 15, 2014, from CNBC: “[Walmart] Chief Financial Officer Charles Holley, at a meeting with investors and analysts, said he expected Wal-Mart’s sales to rise 2-3 percent from $473.1 billion last year. The company said in February it expected net sales growth to be at the lower end of its 3-5 percent forecast.”
October 14, 2013, from FoxBusiness: “The world’s largest retailer missed sales projections and issued soft guidance for the holiday season.”
And yes, there was good news in 2012, when the company “narrowed” its projections — raising the lower end and maintaining the higher end.
Modifying projections in the face of changing realities is critical to business planning, and Walmart is hardly alone in doing so. They get the lion’s share of coverage because they have the lion’s share of the market and because so many businesses — especially those in licensing — are so dependent on the company’s orders.
But investors, suppliers, and others shouldn’t be “startled” when the numbers head south. There’s a pattern here and an easy lesson: Don’t forget to adjust your beginning-of-year forecasts for reality as you go. Just like Walmart.
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