Wal-Mart shares fell Friday, dragging on the retailer sector, after an internal company email, in which an executive said February sales were a "total disaster" so far, leaked out.
"In case you haven't seen a sales report these days, February (month-to-date) sales are a total disaster," Jerry Murray, Wal-Mart's vice president of finance and logistics, said in an email to other executives that was obtained by Bloomberg News. "The worst start to a month I have seen in my (about) 7 years with the company."
Murray cited the payroll-tax increase that kicked in at the beginning of the year as the culprit of weak consumer spending.
Meanwhile, Wal-Mart downplayed the report in its response.
"As with any organization, we often see internal communications that are not entirely accurate, that lack the proper context, and represent individual opinions," Wal-Mart said.
Some analysts have expressed concern that the jump in payroll taxes could be a problem for Wal-Mart and other discount retailers that cater to lower-income consumers with less disposable income.
"You're looking at a very important company in a very important space but it doesn't always mean that as one company goes, so goes everyone else and so goes retail sales," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank. "Wal-Mart does bear watching for hints that there was a slowdown, but I would be hesitant to say the consumer is done. The consumer is very resilient."
Wal-Mart shares fell 2.2 percent Friday. Other major retailers, including Macy's, Family Dollar, Dollar General and Target, ended down more than 1 percent. And the S&P consumer staples sector, which had been trading higher for most of the session, turned lower following the report, but managed to recover by the closing bell with a slight gain.
Wal-Mart is slated to report fourth-quarter earnings next Thursday. Analysts currently expect earnings of $1.57 a share on revenue of $128.92 billion, according to Thomson Reuters.
"We'll have to see what Wal-Mart has to say next Thursday and we don't know the exact context of this email, but you could extrapolate that low-end consumers are certainly being adversely affected by the payroll-tax increase and higher gasoline prices," said Art Hogan, managing director at Lazard Capital Markets.