October 16, 2014 / 1:13 AM / 3 years ago

eBay, Wal-Mart warnings stir holiday sales concerns

4 Min Read

Customers are seen at a Wal-Mart market in Miami, Florida May18, 2010.Carlos Barria

SAN FRANCISCO (Reuters) - EBay Inc (EBAY.O) on Wednesday joined Wal-Mart Stores Inc (WMT.N) in cutting its outlook for the all-important holiday season, suggesting that the fourth quarter may turn out to be weaker than some analysts predicted as recently as last week.

The warnings from two of the retail industry's most influential players comes as investors re-assess the state of the global economy after weak data this week from the two largest countries, the United States and China.

EBay and Wal-Mart blamed divergent factors such as food stamp reductions and unfavorable search-engine optimization for the lower outlooks.

Both complained about the stronger dollar putting the skids on their forecasts, lowering the value of overseas sales once converted into the U.S. currency.

But analysts say stagnant incomes are also prompting U.S. consumers to curtail spending.

"EBay, especially on the marketplaces side, is actually suffering from company-specific setbacks," Wedbush Securities analyst Gil Luria said. "But overall, if e-commerce was growing faster or as fast as it was last year or a couple years ago, it would have probably helped them hide that."

Dollars and Cents

EBay's fourth-quarter outlook was undercut by the strength of the dollar against the British pound, the euro and the Australian dollar, which together account for 35 percent of eBay's volume.

The stronger dollar alone forced eBay to cut its fourth-quarter revenue outlook by $120 million. Coupled with slower-than-expected growth in its marketplaces division, eBay was forced to lop off $300 million from its annual revenue forecast.

"As expected, (retail) sales have accelerated in the second half of the year, though economic signals remain mixed and consumers are still facing headwinds such as weak income growth," Moody's analyst Michael Zuccaro wrote on Wednesday.

The more measured tone may spook investors as retailers such as Amazon.com Inc (AMZN.O) and Target (TGT.N) release results over the next month. Investors and analysts had expressed high hopes for the holiday season as recently as last week.

The National Retail Federation, in a press release entitled “optimism shines,” predicted strengthening consumer confidence would trigger a 4.1 percent spike in November-December retail sales, outpacing the 3.1 percent seen in the same period of 2013.

But the group also warned that consumers remained uneasy about economic conditions, echoing concerns from other analysts including those at Moody's.

Two-thirds of Americans are limiting how much they spend each month, according to a Bankrate.com report released this week. The top reason was stagnant incomes.

eBay Chief Executive John Donahoe told Reuters he was "cautiously optimistic" about the holiday season but declined to discuss the topic further.

In a sign of its cautious view on the U.S. market, Wal-Mart said it would slow store openings in the next fiscal year.

Wal-Mart, which recorded $473.1 billion in sales in its last fiscal year, said it now expects sales to rise 2-3 percent in the current year to Jan. 31, 2015. It had previously estimated growth at the low end of a 3-5 percent range.

Lower gasoline prices had been expected to fuel higher retail sales this winter, especially at Wal-Mart and other chains that cater to low- to middle-income shoppers, analysts said.

Reporting by Deepa Seetharaman; Additional reporting by Nathan Layne; Editing by Cynthia Osterman

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