Thursday, May 16, 2013

Where the hell are they shopping?

By Carl

Wal-Mart reported earnings yesterday, and it’s a bit eye-opening. If I was an investor¹, I’d be very worried:

Walmart, the world’s biggest retailer by sales, reported an unexpected drop in US sales that pointed to pressure on low-income consumers and sent its shares falling.

The discount chain said on Thursday that its US like-for-like sales in the 13 weeks to April 26 declined by 1.4 per cent. It had previously told investors that it expected sales to be “around flat”.

The company blamed the fall on delayed tax refunds from last year for consumers, a rise in the payroll tax rate this year, lower-than-expected food inflation, and bad weather.

Here’s the thing: the stock market is booming. China is suffering. The US economy is gaining momentum, which only happens when consumers go out and buy, regardless of when they get their tax refunds. So someone is selling to them. And if not Wal-Mart, the bastion of low prices and good selection (despite their irresponsible business practices and outright piratical scavenging of local retailers) then where?

When the economy is in the doldrums, and for what we know at this point in time, it still is, Wal-Mart is where people shop. It’s essentially one giant mall of discount prices on, well, not quality merchandise but certainly “better than a yard sale” stuff. People are still hurting out there, even though the worst of it appears to be over. The jobless numbers are still high and personal income is still declining when adjusted for inflation.

Wal-Mart should be selling like it’s ice cream on a hot summer’s day. And yet…

Now, I don’t have a problem with mass merchants, per se. I loved Sears and K-Mart for things like tools and household goods. I can’t help but to indulge in the slightest bit of schadenfreude when it comes to Wal-Mart. My few experiences with shopping in one have left a bad taste in my mouth. The stores are too large, the merchandise is pretty hard to sort through, and well, there’s the people who shop there.

Don’t cry too much for Wal-Mart: despite the drop in sales, they earned more money than they did for the same period last year, so they must be ripping consumers off harder.

¹ Full disclosure: my daughter owns one share, so I can keep abreast of corporate news and so I can vote against the Walton family.

(Cross-posted to Simply Left Behind)

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