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Wal-Mart CEO sees no quick rebound for economy

By Nicole Maestri
/ Source: Reuters

By Nicole Maestri

NEW YORK (Reuters) - The chief executive of Wal-Mart Stores Inc said on Monday he expects the U.S. economy to remain extraordinarily challenging in the first half of the year and that he was not expecting a quick turnaround.

Lee Scott made the comments at the National Retail Federation's annual conference being held in New York. He described it as his last public speech as head of the world's largest retailer before retiring on February 1.

Scott said the U.S. government's efforts to stimulate the economy should have "some impact," but added: "I don't see anything that tells me it's going to turn around quickly."

"The second half of the year, you would hope, would be better," he said. "We all hope by next Christmas it certainly isn't any worse."

Wal-Mart, the discount giant, has been gaining market share in the last year as consumers seek out its low prices on items such as food and medicine to stretch limited budgets.

But a year-long recession, mounting job losses and tighter access to credit combined to produce the worst holiday sales season in nearly four decades, according to the International Council of Shopping Centers.

Wal-Mart was not immune to the harsh climate and last week posted lower-than-expected December sales and cut its fourth-quarter profit forecast.


Scott said this downturn may fundamentally change people's spending habits.

"I'm not necessarily convinced that just when all this liquidity and things hit, if you're going to have the same immediate desire to go back to consumption and debt," he said, referring to a potential U.S. government stimulus plan.

"There are a lot of young people who have learned what it's like when you are living on the edge and the bad times come."

Consumers may not be as inclined to splurge or accumulate debt after having lived through such a difficult economic period, he said.

That could spell more bad news for retailers who are already slowing growth plans, closing underperforming locations and laying off workers as consumer spending diminishes.

NRF President and CEO Tracy Mullin said more than a dozen retailers, including Circuit City and Sharper Image, filed for Chapter 11 bankruptcy protection in 2008.

Adding to the gloomy outlook for the start of 2009, on Monday customer traffic tracking firm ShopperTrak forecast that total foot traffic to retail stores would fall 16.4 percent in the first quarter and U.S. retail sales could fall 4 percent in that same period.

"Although consumers will continue redeeming gift cards and taking advantage of some post-holiday sales throughout January, slow first-quarter shopping levels will have the industry scrambling," Bill Martin, co-founder of ShopperTrak, said in a statement.


Scott said business leaders should not use the downturn as an excuse to avoid tackling tough issues, like the soaring cost of health care or pushing for alternative sources of energy.

"There is no conflict between delivering value to shareholders and helping solve bigger societal problems," he said.

Making reference to a "problem-solving vacuum" in Washington, he pushed for government and business leaders to work together to solve these problems.

The speech echoed comments Scott made a year ago, when he said Wal-Mart would use its heft as the world's largest retailer to push for changes in health care, energy consumption and sourcing.

Under Scott, the retailer has vowed to one day create zero waste and use only renewable energy. In October, Wal-Mart said it would begin tightening controls on its Chinese suppliers by requiring them to meet tougher quality standards or face losing the retailer's business.

Wal-Mart shares rose 25 cents to $51.85, outperforming a 2 percent decline for the Standard & Poor's Retail Index .

(Editing by Maureen Bavdek and Gunna Dickson)