Wal-Mart warning shakes industry

NEW YORK -- Wal-Mart Stores Inc. unsettled the retail industry yesterday, reporting a sales decline for the first time in 10 years and warning that its holiday sales would be disappointing. The discounter's news, coupled with a jump in unemployment benefit claims, raised concerns about the strength of the retailing sector at a critical time of the year.

Wal-Mart's confirmation of weak November sales and its disclosure that December same-store sales gain would be no better than 1 percent came as the nation's retailers reported an overall mixed performance for the month. Same-store sales reflect business at stores open at least a year and are the industry standard for measuring a company's strength.

Wal-Mart's disappointment was a sharp contrast with results from discount rival Target Corp., which beat Wall Street forecasts, and Federated Department Stores Inc., which far exceeded expectations. Other retailers had mixed sales; J.C. Penney Co. and Costco Wholesale Corp. both fell short of Wall Street projections.

Industry analysts generally believed the world's largest retailer is struggling with its own internal problems, not an industry wide malaise.

Still, the discounter's woes raised the possibility that it would incite increasingly aggressive price wars this season that would slice into retail profits. And a Labor Department report yesterday that showed a surprising increase in claims for jobless benefits last week added uncertainty to the outlook for holiday sales.

The timing of Wal-Mart's news couldn't have been worse, coming just after most consumers started holiday shopping. While many retailers had a strong Thanksgiving weekend, Wal-Mart warned Saturday that November sales would be weaker than expected.

Wal-Mart has struggled in recent months with a mix of problems, including the fact that its lower-income customers were hurt by soaring gas prices. But the company's lackluster sales have persisted even as the cost of gas dropped, an indication there are other factors dragging down Wal-Mart's results.

Yesterday's Labor report also raised questions about consumers' comfort level.

The department said 357,000 initial unemployment claims were filed last week, up 34,000 from the previous week. Economists said it was too soon to tell whether the increase indicated a weakening in the job market.