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Thursday, October 19, 2006

Wal-Mart: Let's Cut Prices Before Our Sales Improve

Wal-Mart announced that it would cut prices on over 100 toys and games to get a jump on the holiday season. The company also said it would mark down thousands of entertainment and gift items for the busiest shopping period of the year.

Somehow the move did not seem to be one of strength and optimism about Christmas traffic. But, Wal-Mart same-store sales have only been running about 2%.

Of course, the company hope to make the price cuts up on volume which is not one a strategy that has worked well for businesses in the past. But, the head of America's Research Group said that people will drive an extra 10 miles for a 30% savings on toys.

The move may be telegraphing that Wal-Mart's US sales problems are not over. As sales in its home market have slipped that companies stock has dropped from $57.80 in late 2004 to it current price of $48.35. While the Dow is up about 20% over that period, Wal-Mart is down 8%.

Cheap toys may make it a merry Christmas for all the girls and boys, but not for Wal-Mart management.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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