Walmart facing uphill battle just to survive

Flat may be the new normal for America’s largest retailer.

The holiday shopping period generated an anemic 0.6 percent increase in same-store sales at Walmart, which doubled up on its disappointing news by cutting its sales forecast for fiscal 2016 to “relatively flat.”

The news took the steam out of the Dow Jones industrial average, which had advanced for three straight days — until Thursday. The index slipped less than 1 percent to 16,413.43.

Just several months ago, Walmart estimated that its sales in the fourth quarter would rise between 3 and 4 percent.

Total revenue in the quarter declined 1.4 percent to $129.7 billion while operating profit slipped 16.4 percent.

“Walmart is not hitting its revenue goals and that begs the question of how it’s going to get revenue growing again,” said Edward Jones analyst Brian Yarbrough.

Chief Executive Officer Doug McMillon attributed the profits decline to the company’s $2.7 billion investment in employee salary and wages.

The sales dip was the result of “significant headwinds” from deflation in food prices, along with the warmer temperatures last year that plagued most retailers, McMillon said.

Grocery sales comprise more than 55 percent of Walmart’s sales.

A bright spot for the company was the 7 percent increase in comparable sales for its smaller-store format, known as neighborhood markets, reflecting consumers’ preference for shopping in smaller stores.

The conundrum for Walmart is that the vast majority of its 4,655 stores in the US are sprawling, 150,000-square-foot super centers, which in the past had delivered cost savings of up to 20 percent. But today, Walmart is being beaten on price by many competitors, chiefly Amazon.com.

In January, Walmart pulled the plug on another small-format store — Walmart Express — which it had introduced in 2011. It announced the closure of 154 US stores, including 102 Express stores.

“Walmart is in a tough position,” Yarbrough said. “Consumers are not interested in these huge stores anymore.”

Walmart, which is investing heavily in e-commerce, nonetheless saw online sales grow just 12 percent in the 12 months ended Jan. 31 compared to 25 percent the prior year.

Online traffic increased 7 percent in the fourth quarter.