AP Has Falsely Cited 'Perked Up' Sales at Wal-Mart Since Last Summer

March 13th, 2016 10:53 PM

Retail giant Wal-Mart Stores Inc. apparently got on the good side of the Associated Press a year ago when it announced that would be raising entry-level wages.

Since that announcement, AP, in particular wire service reporter Anne D'Innocenzio, has been excusing the company's relatively poor financial performance while complimenting it for a virtually imaginary "perk up" in sales. Falling profits, store closures, and even the company's mid-February announcement that it expects sales to be "relatively flat" during the 12 months ending January 31, 2017 — summarized in one report from another media outlet as indicating that its customers "are too broke to shop" — have failed to dampen the wire service's strange enthusiasm.

For at least nine months, AP reports have been telling us that the chain's sales will "perk up" or have "perked up," while giving partial credit to the pay raises for that result.

The wire service's D'Innocenzio appears to be responsible for creating the "perk up" meme designed to set the stage for anticipated financial improvements. The problem is that while those improvements haven't arrived, the AP is still pretending that they have.

Here is my earliest spotting of the "perk up" meme clearly intended to set the stage (bolds are mine):

June 2, 2015"Walmart set to raise department manager pay")

Walmart is raising starting wages for more than 100,000 U.S. department managers and workers in its deli and other specialized departments.

The moves mark the next wave of pay raises by the nation's largest private employer, which has been under pressure from labor-backed groups for the treatment of its workers. In February, it announced it was increasing minimum wages for entry-level and long-term hourly employees to at least $10 an hour by next February. That increase affected 500,000 of its 1.3 million U.S. workers.

The wage hikes are part of a $1 billion program at Walmart that also includes improving training and offering employees more control of their schedules. The company is hoping that by investing in its workers, its customer service will improve, and ultimately that will encourage shoppers to spend more, helping to perk up sluggish sales at its U.S. division.

D'Innocenzio's writeup also betrays the underlying motivation, namely to show that supposed "pressure from labor-backed groups" who are claiming credit for something they didn't cause to pay higher-than-market wages won't hurt the company. It clearly hasn't worked out that way, but D'Innocenzio and AP have since been determined not to let the facts get in the way of their "perky" story.

It's obvious that the "perk up" bar hasn't been particularly high, that it would be seen as unacceptably low to anyone familiar with the retail industry, and that the negative impact on the company 's profits and stock price, i.e., what the chain's investors, who include thousands of investors from all walks of life, care most about — have somehow become secondary matters:

(August 18, 2015"Wal-Mart cuts earnings outlook")

Wal-Mart Stores Inc. cut its annual earnings outlook Tuesday because its profits are being squeezed by currency fluctuations, higher wages and investments in overhauling its U.S. stores.

The world’s largest retailer also reported an 11.4 per cent drop in second-quarter profit, and lowered its growth forecast for global e-commerce this year.

However, the retailer offered some encouraging news: The investments are helping to perk up traffic and business at U.S. stores. The retailer posted its fourth straight quarter of increases for an important sales measure.

... Revenue at stores opened at least a year at its U.S. Wal-Mart stores rose 1.5 per cent.

(August 19, 2015"Pay raises, store spruce-ups crimp Wal-Mart’s profit")

Wal-Mart’s second-quarter earnings report was a mixed bag: Its investments to overhaul its stores are helping to perk up sales, but they’re causing more pain to the bottom line than expected.

(October 14, 2015"Walmart forecasts flat sales, lower profits")

Wal-Mart Stores Inc. expects its profit to take a hit as the world’s biggest retailer works to fend off intensifying competition by perking up customer service and adapting to changing shopping habits.

The company, known for its low prices and sprawling supercenters, also forecast sales for its full fiscal year to be flat, hurt by unfavorable currency exchange rates. Walmart had previously forecast sales growth of 1 to 2 percent.

... While the company’s increased investments have helped to perk up sales and traffic, they’ve squeezed profits.

(January 15"Wal-Mart to shutter 269 stores, 154 of them in the US")

Wal-Mart is doing some rare pruning.

The world’s largest retailer is closing 269 stores, including 154 in the U.S. that includes all of its locations under its smallest-format concept store called Wal-Mart Express.

... Michael Exstein, an analyst at Credit Suisse, described the moves as “baby steps” in his report published Friday, but he believes they are positive ones. He noted that this is the first mass closing that Wal-Mart has announced in at least two decades.

“It is a sign that Wal-Mart has begun the process of dealing with unproductive locations in a much more tangible and coherent way,” he wrote. “But we continue to believe that Wal-Mart needs a much larger restructuring of its store base in order to narrow its focus as it seeks to improve its sales and returns, especially internationally.”

Wal-Mart has seen sales perk up for a key revenue measure for the last few quarters in its U.S. business.

(January 20, in an item about the company's next across-the-board pay increase kicking in)

Wal-Mart has already seen sales perk up in its U.S. business as customer experience improves in the stores. But those investments are also coming at a cost to the business. Wal-Mart said last October that earnings for the year, starting next month will be down as much as 12 percent, in large part due to the investment in its workforce. But Wal-Mart has been willing to take a hit to the bottom line.

"We are very clear that if we make sure our associates are being treated fairly, if they are rewarded simply and clearly, we will have a better business," said Judith McKenna, chief operating officer for Wal-Mart's U.S. division.

(March 3, in an item about wholesale club competitor Costco raising its entry-level wages)

With an improving economy, it's becoming tougher to hold on to workers who can easily jump to another job. ...

... Wal-Mart has already seen sales perk up in its U.S. business as customer experience improves in the store. But those investments are also squeezing profits. Kohl's last month also referred to its increase in wages putting pressure on profits.

Wal-Mart's mid-February announcement referenced above told the public that "Comp sales at Walmart U.S. were positive for the sixth consecutive quarter, up 0.6%, driven by the fifth consecutive quarter of positive traffic." Positive is better than negative, but no one experienced in retail is impressed by such a tiny year-over-year increase, or the other still-small increases described in the excerpted AP items above.

The government will be announcing economywide retail sales during February, the first month of Wal-Mart's January 31, 2017 fiscal year, on Tuesday morning. Though its share of all retail sales, which was 11.3 percent in 2014, has dropped a bit since 2009, Wal-Mart is still retail's largest single player.

Meanwhile, the AP has already created the expectation, despite a slowdown in credit growth, that "consumer spending ... is expected to accelerate in early 2016." Given Wal-Mart's guidance for the coming year, it would appear that something has to give.

Whether it will be reported accurately — or at all, given the AP's clearly calculated months-long Wal-Mart deception — is another matter.

Cross-posted at BizzyBlog.com.