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Sweating it out: weak holiday results have Wal-Mart executives and their strategies feeling the heat. Did they go too far, too fast-or not in the right direction at all?

Article Excerpt
T'was a holly, jolly Christmas for many of the nation's retailers, whom the holidays brought an unexpected gift: news of sales declines, merchandising stumbles and executive chaos at Wal-Mart. Sardonic chortles and the clink of glassware toasting to hopes for even more problems at the Bentonville-based retail giant in 2007 could be heard from coast to coast. Alas, the party ended after Wal-Mart said comps rose 2.2% in January, and subsequently reported strong sales and profits for the fourth quarter and full year (thanks primarily to its booming international business).

But what happened at Wal-Mart domestically in November and December of last year has its roots in what happened in those months in 2004. That was the holiday season when even hard-core non-discounters like Saks and Nordstrom ushered in the shopping season with Black Friday sales. At the same time, Wal-Mart went in the opposite direction, featuring markedly fewer deals and deep discounts than usual.

The result? Wal-Mart's start to the season was disappointing, while other retail outlets cashed in. Wal-Mart quickly moved to offer more deals and discounts for the rest of the year.

But, says retail guru Wendy Leibmann, principal of WSL Strategic Retail, that was the point where it became clear that retailers in general had finally figured out how to compete with Wal-Mart. "Wal-Mart has taught shoppers over the last two decades that regardless of income, where they live or how they live, they should not overpay for anything," she wrote in January of 2005. "They should expect low(er) prices and good values everyday, and they do. So on November 26 [2004], disappointed shoppers went up the strip or down the street to look for a better deal at one of the many retailers that now know how to compete with Wal-Mart."

Leibmann termed this new reality "the post-Wal-Mart world." Now, she says, the events at Wal-Mart over the 2006 holiday season show that there is still one retailer working to come to grips with that new reality: Wal-Mart itself.

The company's first attempt began last year--year one of a proposed three-year plan--led by the "fashion forward" initiative to stock trendier...

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