Big Walmart Supplier Denies Order Cuts

Is Walmart (NYSE:WMT) cutting its merchandise orders from suppliers on a widespread basis for the rest of the year, or is it just tweaking a few specific spots? That puzzle got one more piece at the end of last week when Bloomberg reported that Li & Fung, a giant Hong Kong supplier for Walmart and other chains, said it hasn't seen reductions from the world's largest retailer.

That would seem to undercut a Bloomberg story from earlier in the week, which reported that a Walmart ordering manager told a supplier by e-mail that the chain was cutting orders for Q3 and Q4 because of rising inventory levels. Walmart called that story inaccurate; Bloomberg is standing by the story.

Let's step away from the the Walmart-Bloomberg fight over the report, which mainly affects Wall Street (in fairness, it did make Walmart's stock price bounce around). The more serious question for retailers at large is whether Walmart actually expects to need less inventory a half-year out. That would suggest Walmart thinks sales will still be weak well into 2014—a very uncomfortable forecast for Walmart and other chains as well.

That's part of the reason the Li & Fung statement is at least a little reassuring. "There hasn't been any cutbacks from Walmart orders," said Li & Fung CEO Bruce Rockowitz. "When you look across the orders that come from the United States, they are very solid for Walmart." He added that his company is "pretty much right on track on what we've been targeting for this year to get back to our 2011 level."

Translation: Walmart hasn't started cutting back from at least one very large Asian supplier. But everyone is currently below the ordering levels they were at two years ago.

That means Walmart definitely should be making adjustments for ordering inventory. And the anecdotal evidence from some stores makes it clear the weak sales that Walmart and many other big chains have reported are having an impact. Macy's (NYSE:M), for example, had weak sales too. But the department-store kingpin now has its ship-from-store program sufficiently well tweaked that it can get rid of excess inventory from one store by selling it virtually in another. Walmart doesn't have that advantage.

Sometime next year, this tiny tempest of a manager's e-mail will all be academic: We'll know how it played out in terms of inventory, ordering and sales. But it would be nice to know if Walmart really thinks sales are going to tank. It would be even nicer to know Walmart believes they're about to come roaring back.

For more:

- See this Bloomberg story

Related stories:

Walmart Cutting Orders To Stem Inventory Tide
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