What's Bad for Wal-Mart Is Bad for America

Wal-Mart (NYSE: WMT  ) is coming off a strong holiday quarter, but the world's leading retailer provided a cautious near-term outlook in last week's report.

The discount department store chain is projecting flat same-store sales for the current quarter. It claims that a few factors are making shoppers apprehensive about loading up their shopping carts.

  • The 2% increase in payroll taxes -- which is actually the end of a two-year stimulus plan that reduced payroll taxes by 2% -- kicked into effect last month.
  • Gasoline prices have been creeping higher lately. The national average is now $3.75 for a gallon of regular gas, and that's up roughly $0.50 over the past five weeks.
  • One of the unwelcome ramifications of December's fiscal cliff scuffle is that the tax-filing season started two weeks late last month. The move will delay early filers hoping to grab their tax refunds for 2012.

Any of these events could be alarming on its own, but in concert they can be brutal. If your paycheck is smaller and more of what's left is going into your tank -- and the lifeblood of tax filing refunds is held up -- it's going to sting more than just Wal-Mart.

Everybody loves to hate Wal-Mart
Few retailers drum up schadenfreude -- a German word that translates into the pleasure derived from the misfortune of others -- as much as Wal-Mart.

Despite saving consumers money and accounting for nearly 10% of the country's non-car sales, the retailing behemoth has its detractors. Whether it's over Wal-Mart's knack of forcing mom-and-pop shops to close down when they can't compete with an incoming superstore or the retailer's well-documented struggles against labor in terms of wages, holiday hours, and health care provisions, there are plenty of critics who relish when Wal-Mart stumbles.

However, the factors that will apparently weigh on Wal-Mart's performance this time around are obviously not exclusive to Wal-Mart.

It's not just the registers at your local Supercenter that will be smarting if folks have less money to go around, and just wait until a new wave of belt-tightening begins if the automatic spending cuts kick in next month if the sequestering issue isn't resolved.

Cheap will beat out expensive
One can even argue that if Wal-Mart is worried about a slowdown, other retailers and establishments that feast on consumer spending will have it even worse.

When money's tight, folks flock to cheap things. McDonald's (NYSE: MCD  ) may have shocked investors late last year when it posted its first month of negative store-level sales since 2003, but it only illustrates how well Mickey D's held up during the darkest recessionary stretches. A Dollar Menu will serve you well when money's tight.

However, as consumers trade down -- going from burrito joints to buck burgers or going from "cheap chic" to just flat out cheap at Wal-Mart -- traditional department stores will feel the pinch.

Some non-discounters will make out just fine.

Home Depot (NYSE: HD  ) opened higher today after posting a 7% spike in comps for its latest quarter. That's not a surprise. The S&P/Case-Shiller index that tracks home prices revealed this morning that home prices rose more in 2012 than they have any year since 2006. The housing market is recovering, and consumers will continue to invest in sprucing up their homes now that they don't fear foreclosure in a climate of rising home equity.

You also have individual chains that are holding up well. Michael Kors (NYSE: KORS  ) blew investors away two weeks ago when the luxury handbag retailer posted a jaw-dropping 41% surge in comparable-store sales. However, success at Kors has come at the expense of its rivals.

When there's less money to spend, it's a safe bet that the losers will outnumber the winners.

Laughing at Wal-Mart may actually be the same thing as laughing at a mirror.

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  • Report this Comment On February 26, 2013, at 10:22 PM, madmilker wrote:

    You young Americans are so ignorant to what put America in this mess.

    Do you think Wal*Mart has their Global Procurement Office in China to put Americans to work....

    Do you think with Wal*Mart putting less than 5% foreign in all their stores in China that they are getting more and more of the Chinese currency (yuan) to be sent to America to help balance a thirty-seven year trade deficit....

    Do you think when Wal*Mart partnered with Li Ka-shing from Hong Kong on a port in Mexico that more American jobs would be created on the East and West Coast of America....

    "schadenfreude" .....Well, why don't all you young Americans ask all those nice people of Germany who had the misfortune there years ago....

    Americans stop supporting their workers in the early 70's by being brainwash by corporate retail that if they bought so-call cheap foreign they would become wealthier...

    Duh..!! 1975 was the last year America had a trade surplus....the year before....it didn't have 46 million people on food stamps nor did it have 20 million unemployed....

    Corporate Retail makes NOTHING...it only moves a countries currency...

    The best thing that could happen to the United States of America would be for the American consumer to stop letting the largest Retailer send their US dollars to China.

    If Wal*Mart wasn't moving all that foreign off their shelves it wouldn't be long you young Americans would have a job or there wouldn't be a Corporate America nor one retailer...

    Stop with the Wal*Mart is a good thing crap....

    It left Germany...

    It left South Korea...

    Do you think it left because those nice people are stupid....

    Wake-up..!!

    "It is the aim of good government to stimulate production, of bad government to encourage consumption." - Jean Baptiste Say

    Over 70% of the US GDP is from the American consumer spending US dollars today.......

    60% of manufacturing is gone from America that was here in 1960....

    Currency of a country is the fuel for that country to survive.....once all the currency is gone there is only two things left..... Government that can only make DEBT....America was $71 million in debt six years before George Washington left office in 1796....and the other is Retail...which makes NOTHING....it can only move a countries currency.

    The America consumers of the 30's, 40's, 50's and 60's wasn't letting Retail move the American currency to foreigners....

    but for the past thirty-seven years....the American Government has went from a $533 billion in debt in 1975 to over $16 trillion today by having to print George Washington's that Corporate Retail keeps sending to foreigners....

    Maybe all you young Americans need another one of those German proverbs to get the sand from your eyes....

    "Money taken, freedom forsaken"

    Goodnight and God Bless..!!!

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