US retail behemoth Wal-Mart (WMT.US) is rolling out a fresh private-label womenswear collection called Scenario across its stores, a strategic push to capture the attention of younger customers. The vast majority of Scenario’s items—spanning jeans, blouses, and tops—will be priced below $25, and the line will occupy shelf space previously dedicated to the retailer’s earlier in-house brand, Time and Tru.
This launch arrives as Wal-Mart has posted seven consecutive quarters of growth in apparel and accessories sales, all while steadily chipping away at market share from department stores and specialty clothing chains. Denise Incandela, the company’s executive vice president of fashion, acknowledged that Wal-Mart has not been fully meeting shoppers’ expectations in clothing. According to internal data, “even though our customers recognize the exceptional value we offer, they haven’t given us equal credit for style and quality.”
Notably, the move comes on the heels of Wal-Mart’s latest earnings report last week, which painted a mixed picture. While second-quarter revenue hit $187.94 billion (up 5.9% year over year), edging past the anticipated $186.87 billion, and adjusted earnings per share of $0.81 also beat the $0.74 forecast, same-store sales in the US (excluding fuel) rose just 2.6%—the weakest showing in over six years and far below the 3.7% to 3.8% analysts had predicted.
As a retail bellwether serving more than 150 million customers weekly, Wal-Mart’s slowing comparable sales are fueling broader worries about a softening consumer climate. Even though the company raised its full-year guidance—net sales growth is now projected at 4% to 5%, up from the prior 3.5% to 4.5%, and adjusted EPS is expected between $2.80 and $2.87, versus the earlier $2.75 to $2.85 range—the profit outlook still fell short of expectations. The midpoint of the EPS forecast, $2.835, came in below the street’s $2.90 consensus.
That gap has sparked investor unease: if Wal-Mart, a retailer that has historically thrived during trade-down trends, is beginning to see signs of deceleration, the broader consumer economy may be approaching a turning point.
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