Hiked Payroll Taxes Hurt Popular Retailers

Broke customers have add-on effects

The payroll tax increases and delayed tax returns that Wal-Mart Stores Inc. executives blamed in internal e-mails for weak February sales may be poised to hurt other retailers as well.

Wal-Mart had the worst monthly sales start in seven years, according to internal e-mails obtained by Bloomberg News and reported Feb. 15. Jerry Murray, Wal-Mart's vice president of finance and logistics, in a Feb. 12 e-mail called the retailer's February month-to-date sales "a total disaster."

"It's not Wal-Mart specific," David Strasser, an analyst for Janney Montgomery Scott LLC in New York, said in a telephone interview yesterday. Family Dollar Stores Inc., Target Corp. and supermarkets are encountering similar effects, he said. "Anyone with any low-end exposure is going to feel this. That customer runs out of money every day as it is. Now they're really going to run out of money."