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Wal-mart Struggles Sign of Economic Recovery?

Companies / Corporate Earnings May 15, 2009 - 02:17 AM GMT

By: LiveCharts

Companies

This week has been known as the retail earnings reports week on Wall Street as many top retailers have reported earnings already this week. With a mixed bag of earnings and compiled data still showing struggles in retail sales, it is tough to figure out what direction retailers are providing for the economy and investors.


Perhaps, there is no better company to look to for a perspective on the retail industry than Wal-mart. Easily the largest retailer in the world in terms of sales volume, Wal-mart is often looked to as the symbol of retail performance. Ironically, the company often performs opposite the general market trend. As retailers began to struggle during the economic downturn, Wal-mart went from tough times to reasonable sales and profit growth. The iconic discount retailer and economy buyer’s haven is a natural fit for shoppers on a tight budget.

Wal-mart posted flat first quarter earnings, which seems to suggest many consumers are starting to feel more comfortable opting for more high quality brands again. Some analysts have begun to suggest that the economy might have already hit bottom during the first quarter of the year and we are already on the upswing. Still, Wal-mart captured market share in the quarter, and says about half of its sales came from grocery products.

In fact, as has been the case with many of the retailers this week, a change in dollar exchange rates has contributed to some lower than expected sales figures. As international retailers have pulled income back into to dollars from other countries, the exchange rate has produced less dollar revenue that had been the case during much of 2008 when exchange rates were adding to revenue numbers.

So, what can we make of the Wal-mart earnings report? If consumers were flooding to Wal-mart at the depth of economic turmoil and hardship, it seems to make sense that consumers moving away from thrifty buying is a good sign for the economy. The truth, though, is that many analysts believe Wal-mart might be able to succeed for the near future, even if the economy is picking up.

While consumers may be out and about more these days, they are still looking for good bargains. Wal-mart officials have suggested that the company has worked hard to capture some new shoppers looking for more affordable discretionary items. Rather than not spending discretionary funds, officials believe many Americans have simply decided to spend less for the thing they buy. New company CEO Mike Duke has commented about the reshaping of customer thinking. He believes the average American consumers is becoming more ingrained with a value-conscious buying mentality that should hold even as the economy recovers.

So, despite the surface appearance that flat earnings at Wal-mart is a reversal of the struggling economic trend that produced better earnings previously, the correlation might not be as strong as once thought. Maybe Wal-mart and the economy can continue to thrive together.

Neil Kokemuller

LiveCharts.co.uk

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University. He is also in house stock market commentator at Live Charts UK, where you can find real time charts and share prices .

Copyright © 2009 Live Charts

Please note: The information provided in this article is intended for informational and entertainment purposes, and not as advice for financial decisions or investments. Actions taken on the basis of the information shared is at the sole risk and discretion of the individual. Currency investment poses significant risk of loss.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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